Apple’s next big moneymaker is its biggest headache in China

Apple CEO Tim Cook attends the China Development Forum in Beijing, China, March 18, 2017.

For Apple, this summer is closing with good news and bad news.

On the one hand, its financials suggest that as iPhone sales plateau globally, it can count on software to spur growth. Revenue in Apple’s “Services” category—which includes sales in the App Store, as well as Apple Music subscriptions and other media—hit $7.27 billion for the three month-period ending July 1, making it the company’s second-largest business unit.

On the other hand, that growth is increasingly threatened in China, where Apple’s software ambitions face tough challenges as Beijing continues its efforts to wean the country off foreign technology.

The most recent incident came this week when Beijing-based law firm Dare & Sure announced it had filed a complaint (link in Chinese) to China’s National Development and Reform Commission (NDRC), which oversees antitrust issues, and the State Administration for Industry & Commerce (SAIC), alleging that Apple has been engaging in monopolistic behavior. Representing a group of 28 developers, the firm argues that Apple deletes apps without sufficient explanation, and that its standard 30% take on in-app purchases is unfair. In April, when the firm first announced it was looking for Chinese developers (link in Chinese) to potentially represent, it wrote:

“Some of Apple’s behavior when operating the App Store, when coupled with its absolute advantageous market position, will or already has produced a negative impact on market competition. If Apple cannot explain the reasoning behind this behavior, or cannot prove that this sort of behavior creates benefits in the market that make up for its negative impact, this sort of behavior ought to be subject to China’s anti-monopoly regulations.”

In response to the complaint, Apple said in a statement sent to Quartzthat the App Store “has published guidelines that apply equally to all developers in every country,” and added that it holds “workshops in China throughout the year” to help Chinese developers. It did not address the lawsuit directly.

The SAIC did not reply immediately to Quartz’s request for comment. The NDRC couldn’t be reached for comment.

It’s not clear if the complaint will turn into a case. It’s also not the first of its kind—in 2012, a group of iPhone owners filed a suit against Apple arguing that its 30% take from the App Store was anti-competitive, and the case has yet to close. But the suit marks one of several instances where Apple’s software business has come under pressure in China.

In late July, Apple removed dozens of VPN apps from China’s App Store due to government demands. While not a wholesale removal, the ban nevertheless follows the government’s wider crackdown on software that circumvents the so-called Great Firewall, which blocks access to websites like Google and Facebook.

In May, Chinese tech giant Tencent removed a button in its chat app WeChat that had allowed users to donate small sums of money to bloggers and media personalities. Apple argued that the button was in violation of its policy of taking 30% of from in-app purchases. It also came not long after WeChat launched an app store of its own, which, if it becomes successful, could compete against Apple’s.

Before those incidents, the government targeted other software offerings from Apple. In January it forced Apple to remove the New York Times app from the Chinese App Store. Last year, the government forced Apple to shut down its Chinese iBooks and iTunes movie stores.

Apple needs Service revenue from China just as much as from everywhere else, if not more. For its most recent earnings (and for the third quarter in a row), the Greater China region (which includes Taiwan and Hong Kong) remained the only part of the world where total revenues, which come overwhelmingly from iPhone sales, did not grow annually.

Apple has taken additional steps lately that might help smooth the course in China. Recently it announced it would open a data center in China, in swift compliance with the recently-implemented Cybersecurity Law. It also created a head of Greater China position, and appointed native Chinese-speaker and longtime Apple executive Isabel Ge Mahe to take on the role. As long as these incidents continue at the same pace, she’ll have her hands full.

 [Source”cnbc”]

Apple’s Services Business Is Growing Like The ‘FANG’ Stocks, Should It Be Valued Like One?

 Image result for Apple's Services Business Is Growing Like The 'FANG' Stocks, Should It Be Valued Like One?

Apple’s Services business has also seen robust growth, emerging as the company’s second largest segment in terms of revenue. Apple’s Services revenues grew by 21% in calendar year 2016 (the company’s fiscal year ends September 30) to a little over $25 billion, making it almost as large as Facebook. However, Apple, and its Services operations, aren’t valued like other high-profile Internet companies such as the so-called “FANG” stocks – Facebook, Amazon, Netflix and Google (Alphabet). In this note, we take a look at some of the key drivers of Apple’s Services business and its valuation.

We have a $164 price estimate for Apple, which is slightly ahead of the current market price.

Why Apple’s Services Valuation Lags Other Internet Companies

We currently value Apple’s Services segment at about $150 billion (excluding Apple’s net cash position), using our discounted cash flow model. This translates to a forward revenue multiple of about 5x. This is well below Netflix (valued at ~7x forward revenues), Facebook (13x) and Google (6.3x). While this is partly due to slightly lower growth rates and potentially lower margins, there are also some other factors that limit Apple’s Services business from being valued like other Internet stocks. For one, Apple’s Services revenues are tied to the sales of its devices, and there could be a slowdown in sales if Apple’s hardware shipments falter. For instance, customers tend to buy the AppleCare plan at the time of their device purchases, while potentially loading up on more paid apps earlier in the life cycles of their devices. Moreover, Apple has been reluctant to leverage user data – which is extremely valuable for Internet companies – as it focuses on the privacy aspect of its devices. In contrast, Google, Amazon and Facebook have shown a willingness to work with user data from their search, e-commerce and social media operations to grow their businesses.

Apple Still Has Ambitious Plans For Services

Apple has set a target of effectively doubling its Services revenues by 2020 (~18% CAGR between 2016 and 2020). While the company has grown Services revenues at an average rate of around 23% per year over the last five years, driven by an expanding iOS user base (we estimate that the user base grew 3x between 2011 and 2016), it’s unlikely to see similar growth rates in its installed base going forward. Instead, the company will have to primarily rely on expanding its Services ARPU to meet its targets. We estimate that its ARPU (considering only iOS devices) stood at about $33 last year.

There could be multiple avenues for Apple to improve its services ARPU. Firstly, App store revenues are expanding, and there may be further scope for growth as Apple launches new developer kits such as the augmented reality-focused ARKit, which could enable a richer Services experience. Apple also earns a commission (typically 15% to 30%) from third-party subscriptions on its platform, and it could be a big beneficiary of trends such as cord cutting and a shift towards streaming music services. For instance, the number of paid subscriptions on its platforms, including both Apple and third-party services, now exceeds 185 million, marking an increase of 20 million in the last three months alone. The Apple Pay business could also see revenues accelerate (albeit from a very small base) over the next few years, as Apple has already done much of the heavy lifting in terms of building out the requisite infrastructure in many developed markets. The company’s push to capture more budget-conscious users with devices such as the $329 iPad and the iPhone SE could also help it to expand its installed base and, in turn, drive Services revenues. While we expect the Services business to be a major driver of the company’s long-term growth, its relative discount compared to the “FANG” companies does seem warranted.

 [Source”timesofindia”]

Apple’s earnings have Wall Street learning to ‘stop worrying and love the super cycle’

It’s a strange love that analysts have for Apple Inc.’s stock, leading some of them to turn to Stanley Kubrick’s classic movie in order to describe the company’s latest quarterly results.

Apple’s AAPL, +0.89% earnings beat forecasts, helping to spark a 6% rise to around $159 for the tech titan’s shares in recent premarket action.

One top worry ahead of the release stemmed from reports that Apple was running into problems in building its next iPhone. There had been concerns that such problems could hurt the “super cycle” analysts expect in the fall to push the company’s biggest moneymaker back to sales growth.

For analysts at RBC Capital Markets, Tuesday evening’s earnings update largely puts those fears to rest.

“The material surprise was strong Sept-qtr guide that effectively implies NO iPhone launch delay, despite myriad of blog and supplier commentary to the contrary,” wrote an RBC team led by Amit Daryanani in a note.

In other words, Apple’s guidance for its September quarter was the big shocker, according to Daryanani and his colleagues.

They raised their price target for the stock to $176 from $168 and backed their rating of outperform, or buy. The RBC analysts titled their note “How I Learned To Stop Worrying & Love The SuperCycle,” in a reference to Kubrick’s dark comedy “Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb.”

Apple said it sees revenue in a range of $49 billion to $53 billion for its fiscal fourth quarter. That suggests that the company does not expect sales of new iPhones to be pushed into the next fiscal year, a MarketWatch First Take notes.

PiperJaffray analysts made a similar point about the worries around Apple’s key gadget.

WSJ Interview: Trump on Taxes, Apple, Iran and Jeff Sessions

“The outlook implies that fears of an iPhone X launch delay, and/or limited availability of the device, may have been overblown,” wrote Michael Olson and Yung Kim in a note.

The PiperJaffray team lifted their price target to $190 to $158 and maintained their rating of overweight, or buy.

Other analysts are more downbeat, however.

KeyBanc’s team have taken a difference stance to that of Apple CEO Tim Cook. He said chatter around the path for future iPhones was greater than normal and affected sales, yet any “pause” due to such buzz “probably bodes well for the future.”

In contrast, the KeyBanc analysts led by Andy Hargreaves said “pent-up demand does not appear to be building.” They put a price target of $150 on a stock and reiterated their rating of sector weight, or hold.

“We believe the current valuation balances the potential for upside in the coming cycle, with the likelihood for a longer-term slowdown in growth related to high-end smartphone market saturation and diminished value in incremental innovation,” Hargreaves and his colleagues wrote in a note.

Many analysts have been highlighting a potential “super cycle” surrounding Apple’s next updates to its smart phone — because of both form-factor upgrades and the record number of older-model iPhones in use that may inspire an unusually large number of purchases of the latest model.

[Source”pcworld”]

Apple’s Greater China business now has its own managing director for the first time

Apple has appointed Isabel Ge Mahe as its first vice president and managing director of its business in Greater China.

China-born Ge Mahe is tasked with managing Apple’s China business, and she will report into CEO Tim Cook and COO Jeff Williams when she takes up the role, which is based out of Shanghai, “later this summer.”

Ge Mahe is currently located in California, where she has spent the last nine years heading up Apple’s wireless technologies software engineering teams. That includes the development of cellular, Wi-Fi, Bluetooth, NFC, location and motion technologies in products, and Apple said she has also overseen its Apple Pay, HomeKit and CarPlay technologies.

“Everyone at Apple is proud of the contributions we make to the communities where we do business, and I am looking forward to deepening our team’s connections with customers, government and businesses in China to advance innovation and sustainability,” Ge Mahe said in a statement.

That mention of government in her statement is interesting since it hints that Ge Mahe may take a leading role in liaising with authorities in China. Apple this month announced plans to develop its first China-based data center, a move that is thought to be related to the country’s new cybersecurity laws which went into effect June 1, and this appointment may also be connected.

While there are many business reasons to have a Greater China MD — Apple’s revenue from the region can make or break its quarterly earnings report — having a lead may help with sticky issues in the country. Earlier this year, for example, Beijing authorities summoned Apple to explain its standards for live-streaming apps. The government has since shuttered a number of live-streaming services that it found were in breach of its media standards.

[Source”cnbc”]

Apple’s latest video on YouTube highlights iPhone 7’s Memories

Apple's latest video on YouTube highlights iPhone 7's Memories

The videos created by ‘Memories’ collects pictures and videos from camera roll based on their location, time and content. It automatically comes up with videos that can be located in the camera roll.

The feature is not one of the technological innovations the world has not seen. As a matter of fact Google Photos has the exactly same feature. However, the video is very creative in all its true sense and Apple sure wants to strum the right chords in viewers hearts to generate sales for iPhone 7. Apple has posted yet another video that guides viewers to the Memories feature.

All you need to do is open the photos app, locate memories tab at the bottom and click on it. A series of videos appears on the screen which one can play by simply clicking on any of it. Iphone 7 will soon be replaced by iPhone 7s and iPhone 8 variants. The smartphone has already seen a decline in sales in the second quarter of 2017 which will further drop once the latest iPhones take over.

Iphone 7 which is the most iconic smartphone from Apple in the matter of innovative technology has several features that no other smartphone manufacturer has yet come up with. The dual camera on iPhone redefined smartphone photography. OnePlus 5 also has a similar feature but Apple’s exceptional quality is hard to beat even for OnePlus.

 

[“source-gizbot”]

Apple’s AR is closer to reality than Google’s

Apple has often been accused of acting like it invented things that others have been doing for years. That complaint is not without merit, however Apple can lay claim to transforming existing things into mainstream successes, which takes no small amount of invention in its own right. Fingerprint authentication and contactless payments are just two recent examples, having both existed in Japan and on niche devices for over a decade before Apple raised them to global prominence with the iPhone.

Next up on Apple’s agenda is augmented reality, the act of superimposing digital data and visuals atop a live video feed of your surroundings — something that Google, Microsoft, and many others have been experimenting with for a long time. Apple is far from being able to claim it invented AR, but its new ARKit in iOS 11 is already showing signs to suggest that Apple will help bring AR into the mainstream faster and better than anyone else.

The chronic problem with augmented reality has always been one of practicality. You could have the most basic forms of AR on your regular phone, as provided by apps like Layar, which has been around since 2009, but those have never been particularly compelling. Or you could have more sophisticated and appealing augmentations, as presented by Google’s Tango project, but you’d need a big fat phablet to lug around to make them happen. Apple’s difference is to combine the convenience of your daily phone with the appeal of advanced AR.

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Made With ARKit @madewithARKit

Measure distances with your iPhone. Just because you can. Clever little #ARKit app by @BalestraPatrick ‍♂️ http://bit.ly/2sFl8RB 

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Looking at this distance-measuring app, it seems so simple and obvious. Of course your super-powered, multi-core phone should be smart enough to measure out basic distances, and there have indeed been many wonky apps trying to do that in the past. But measuring with AR, as already shown off by Google Tango phones, allows you a much more intuitive method for doing it. Having the phone actually aware of the three-dimensional space in its view allows for precise measurements, which can be represented with a neat hologram of a measuring tape. Apple’s advantage in the contest for doing this best is simple: while Google Tango demands special hardware, ARKit requires only that you have a recent iOS device. At WWDC earlier this month, Craig Federighi described ARKit as “the largest AR platform in the world,” and he was right.

Apple’s AR will immediately reach millions of people who already have the requisite hardware. And while it looks to be functionally as flexible and capable as Google’s Tango (check out some early examples of fanciful experiments with ARKit), its broader audience makes it much more enticing for serious developers to invest their time and money into. Google’s Tango is about the future whereas Apple’s ARKit is about the present.

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Made With ARKit @madewithARKit

BOOM And just like that we have #ARKit measurement app number 2 http://bit.ly/2sbaNta  → by @laanlabs

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Considering how little time it took to develop two convincingly accurate AR measuring apps with the iOS 11 beta, and reading the comments from their makers, Apple also appears to have an advantage in the ease of development with ARKit. It’s exciting to think that there are still three months before the release of the next iPhone and the accompanying finalization of iOS 11, by which time Apple’s big-budget app developer partners are likely to have a deluge of AR-enabled apps for people to play with. That’s how stuff goes mainstream: as a big wave of change that touches everyone from casual Pokémon Go players to serious home DIY geeks figuring out how to arrange their living room furniture.

For the people who don’t care about incremental changes in phone specs or design, the differentiator between devices has always been in the unique things that each one can do — or, failing that, the convenience and ease of use of common features. Apple’s iPhone is more convenient than Google’s Project Tango devices and with iOS 11 it’ll have much better AR capabilities than its nearest premium Android rivals. So if we’re looking for the AR innovator that will take the technology into the mainstream, Apple once again looks like the likeliest suspect.

[Source”GSmerena”]

 

Apple’s Week Centered on Tim Cook and Qualcomm

Story image for Apple from Fortune

In a first in quite some time, Apple suffered from a rather troubled week.

Over the past several days, Apple was forced to deal with some problems. The company has been quietly scrubbing the App Store of what has been called “hundreds of thousands” of apps that are delivering little to no value to users. Additionally, the company’s fight with chipmaker Qualcomm intensified this week. And Tim Cook, Apple’s chief executive, watched his employee approval rating fall. But in a bit of bittersweet news for Apple, the company’s e-book troubles are being put to rest.

Overall, it wasn’t the best of weeks for Apple (AAPL, +0.45%). But even so, there are no signs of business troubles in Cupertino, so it wasn’t all bad.

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Here’s our look at the biggest Apple news from the past week:

This is Fortune’s weekly roundup of the biggest Apple news this week. To see last week’s roundup, click here.

  1. Apple CEO Tim Cook’s employee ranking is down for 2017. In a new study from Glassdoor, Cook took the 53rd slot in a ranking of the world’s top CEOs by employee opinion. Cook earned a 93% approval rating in the study. That’s down from a 96% approval rating last year, when he took the eighth spot in the study. Glassdoor didn’t say why Cook’s approval rating fell year over year, but he’s still far ahead of most chief executives: the average CEO approval rating is 67%.
  2. Apple opened a new front in its battle against Qualcomm this week, saying the chip-maker shouldn’t get a cut on every iPhone it sells. Qualcomm has argued that it should get a license on each iPhone sold, and has been accused by Apple of withholding $1 billion in rebates. The companies are battling the case in a U.S. federal court.
  3. Good news if you have an Apple e-book credit: you can cash it in. Bad news if you have an Apple e-book credit: you have practically no time to do it. Those who are eligible for a credit received emails this week informing them that they would need to cash in their rebates by Saturday at 11:59 p.m. PT. That means you have just hours to get your credit. The credit is the result of Apple’s protracted battle over alleged e-book price-fixing between 2010 and 2012. Apple was ordered last year to pay $400 million in refunds to those affected by its e-book pricing.
  4. If you’re looking to save a few bucks on Apple Music, it’s now possible. Apple has quietly added an annual Apple Music subscription to the service for $99. That’s a $21 savings on the standard $9.99-a-month option. It’s a bit buried, however, so click here to find out how to access the annual Apple Music subscription.
  5. Apple has been quietly removing “hundreds of thousands” of useless apps from its App Store over the past year, according to TechCrunch. Apple has also updated its App Store guidelines to ban apps that use a “commercialized template or app generation service.” The move could reduce the chances of spam or scam apps making their way into the App Store.

One more thing… An unidentified bidder this week bought an original—and working—Apple I computer for $355,500 at a Christie’s New York

[Source”pcworld”]

Apple’s anti-leaking strategy just leaked

Apple wages a constant war on leakers designed to ensure it can unveil new products on its own terms. But the leaks never seem to stop, and it’s evident they won’t anytime soon.

The Outline’s William Turton obtained a leaked recording of an Apple presentation on Apple’s anti-leaking efforts, hilariously highlighting how difficult it can be to stop leaks.

The presentation reveals the elaborate steps Apple takes to safeguard the secrecy of its products. Apple has recruited a large team of anti-leak investigators, including people who previously worked at the National Security Agency, the FBI, and the Secret Service. One investigation lasted for three years.

“These investigations go on a long time,” Lee Freedman, who was an assistant US attorney before leading Apple’s investigation team, said in the recording. “We don’t take a defeatist mentality and say, ‘Oh well, it’s going to leak anyways.’” In one case, Apple pursued a case for three years before identifying the leaker.

One of Apple’s big challenges has been leaks from manufacturing facilities in China. To prevent these leaks, Apple requires Chinese workers to be searched as they enter and leave factories where Apple products are made. In the recording, an Apple official bragged that Apple screens more people than the TSA: “Their peak volume is 1.8 million a day. Ours, for just 40 factories in China, is 2.7 million a day.”

Apple has less draconian, but still extensive, security procedures at its American campuses.

Apple’s brass believes that all this secrecy helps the company’s bottom line. Early leaks of a forthcoming product could discourage customers from buying Apple products that are already on store shelves. And the surprise of a big Apple product reveal makes news organizations more likely to cover it.

At the same time, it’s hard to be sure if any of this really matters. Apple loyalists are going to buy a new Apple product sooner or later. And Apple is such a prominent brand that there’s little risk of customers not hearing about a new Apple product

[Source”pcworld”]

iPad Pro 9.7in review: Apple’s slick, superfast tablet could be another nail in the coffin of laptop culture… but it’s not perfect

iPad Pro 9.7in review

Welcome to Macworld’s iPad Pro 9.7in review for the UK. If you’d prefer a larger screen, read our iPad Pro 12.9in review.

Apple unveiled a new mid-size iPad at its ‘Let us loop you in’ March press event, as was widely expected, but what we didn’t expect was for this to be an iPad Pro. Rather than calling this the iPad Air 3, which it logically and visually appears to be, Apple is presenting it as a shrunk-down version of the 12.9in iPad Pro – and thereby attempting to position the new 9.7-inch iPad Pro as a work device suitable for replacing a laptop, and targeted particularly at designers and illustrators on the go.

But does it succeed? In our iPad Pro 9.7in review, we evaluate the latest iPad’s design and build quality, weigh up the pros and cons of its new features, put the device through the Macworld labs’ most rigorous speed benchmark and battery tests, and compare the value for money that the iPad Pro 9.7in offers compared to the other tablets on the market.

iPad Pro 9.7in review

iPad Pro 9.7in review: Summary of review

Design: Physically the iPad Pro 9.7 is a close match to the iPad Air 2: weight and dimensions are identical, as is the general design (which remains sumptuous, of course). You now get four speakers – two at the top, two at the bottom – and the bottom speakers are spaced slightly further apart. This results in a much fuller, richer sound – not exactly surround sound, but a far more immersive audio experience than we’ve come to expect from a tablet.

Cameras: One other noticeable physical change is the rear-facing camera, which now sticks out and will scratch on the desk if you lay the iPad flat on its back. Slightly annoying, that, although any sort of case will remove this issue, and you do get the payoff of a heavily enhanced camera setup. The rear-facing camera now has a flash, and has been pushed from 8 megapixels (on the Air 2 and the Pro 12.9in) to 12Mp; there are also numerous smaller improvements to this component.

The front-facing camera is even more dramatically boosted, going from 1.2Mp to 5Mp and gaining the Retina flash feature. We look at all this in more detail, and present a selection of test shots and comparisons, in the camera testing section, but suffice it to say that in some conditions you won’t notice the difference from the Air 2’s cameras, in others you’ll notice small improvements, and in others it’s in a whole different class.

Screen: The 9.7-inch touchscreen Retina-class display is in most respects the same as that on the Air 2: same size, same resolution and pixel density, same sharply responsive multitouch functionality. But it adds a new (and optional) feature called True Tone, designed to subtly adjust the screen’s colour output to account for environmental light conditions. And we do mean subtly – it’s a similar kind of idea to Night Shift, producing a warmer, yellower colour palette under electric lighting, but to a much less noticeable degree. We imagine most users will only be dimly aware that the screen seems to have good colour output without being sure why; we saw a clear difference only by sitting it next to the (non-True Tone) iPad Air 2 in various conditions.

Speed: Thanks to its A9X processor chip, the Pro 9.7 is significantly faster – at least on paper – than the Air 2, and in most tests very nearly as quick as the iPad Pro 12.9 despite having half as much RAM. For the time being you won’t notice much difference between the Pros and Air 2, but the older device is sure to get left behind as more and more processor-intensive apps and games are released with the newest generation of hardware in mind. s

Battery: Early battery testing was also impressive, with the Pro 9.7 lasting, surprisingly, 11hrs 11m in GeekBench 3’s highly demanding benchmark despite having slightly lower battery capacity than the Air 2 (which managed just 7hrs 40m) – although stay tuned for repeat tests. Both devices should last longer than that in general use.

iPad Pro 9.7in review

Accessories: Crucially for its credibility as a laptop replacement, the Pro 9.7 has launched alongside a new keyboard case, a 9.7in version of the Smart Keyboard, and like the Pro 12.9 it features a port on its lefthand edge for connecting to and powering this accessory. It’s about as good as an ultraportable keyboard of its size could be, but nowhere near as accurate to type on as a conventional keyboard (and some way behind the larger 12.9 version of the Smart Keyboard, too). It does a job, but you’ll need to rely on either a solid autocorrect (like the one in Pages), frequent manual corrections, or just lots of practice.

You can also now use the Apple Pencil stylus, which is pretty wonderful, but expensive.

UK pricing: The Pro 9.7in starts at £499 in the UK, with prices rising to £839 for the 256GB cellular model. You’re paying a premium, then, and many Apple fans will baulk at the asking price. But we think there are enough enhancements here to justify it, and business users – if they can live with the smaller and harder-to-use keyboard attachment – will get a lot out of this device. It’s still a cool £180 cheaper than the Pro 12.9, remember, and that device doesn’t get the True Tone display or most of the camera upgrades.

That’s the summary of our iPad Pro 9.7 review, but let’s look again at each of those areas in more detail – before finally giving our definitive verdict.

iPad Pro 9.7in review
[Source:- Macworld]