Apple's next big leap might be into augmented reality

Apple's iPhone may be ready for its next big act — as a springboard into "augmented reality," a technology that projects life-like images into real-world settings viewed through a screen.

If you've heard about AR at all, it's most likely because you've encountered "Pokemon Go," in which players wander around neighborhoods trying to capture monsters only they can see on their phones. AR is also making its way into education and some industrial applications, such as product assembly and warehouse inventory management.

AP Photo, File

Now Apple is hoping to transform the technology from a geeky sideshow into a mass-market phenomenon. It's embedding AR-ready technology into its iPhones later this year, potentially setting the stage for a rush of new apps that blur the line between reality and digital representation in new and imaginative ways.

"This is one of those huge things that we'll look back at and marvel on the start of it," Apple CEO Tim Cook told analysts during a Tuesday conference call. Many analysts agree. "This is the most important platform that Apple has created since the app store in 2008," said Jan Dawson of Jackdaw Research.

There's just one catch: No one can yet point to a killer app for AR, at least beyond the year-old (and fading) fad of "Pokemon Go." Instead, analysts argue more generally that AR creates enormous potential for new games, home-remodeling apps that let you visualize new furnishings and decor in an existing room, education, health care and more.

For the moment, though, we're basically stuck with demos created by developers, including a "Star Wars"-like droid rolling past a dog that doesn't realize it's there; a digital replica of Houston on a table ; and a virtual tour of Vincent Van Gogh's bedroom .

John Knoll, of Industrial Light & Magic, right, speaks about virtual reality during an announcement of new products at the Apple Worldwide Developers Conference in San Jose, Calif. (AP Photo, File)

AUGMENTING THE IPHONE

At Apple, the introduction of AR gets underway in September with the release of iOS 11, the next version of the operating system that powers hundreds of millions of iPhones and iPads around the world

Tucked away in that release is an AR toolkit intended to help software developers create new AR apps.

Those apps, however, won't work on just any Apple device — only the iPhone 6S and later models, including the hotly anticipated next-generation iPhone that Apple will release this fall. The 2017 iPad and iPad Pro will run AR apps as well.

Apple isn't the only company betting big on AR. Facebook founder Mark Zuckerberg talked up the technology at a company presentation in April, calling it a "really important technology that changes how we use our phones." Apple rivals such as Google and Microsoft are also starting to deploy AR systems .

WAITING FOR APPLE'S NEXT BIG THING

Apple has been looking for something to lessen its dependence on the iPhone since the 2011 death of its co-founder CEO Steve Jobs, the driving force behind the company's innovation factory.

Cook thought he had come up with a revolutionary product when Apple began selling its smartwatch in 2015, but the Apple Watch remains a niche product.

For now, the iPhone remains Apple's dominant product, accounting for 55 percent of Apple's $45.4 billion in revenue during the three months ended in June. The total revenue represented a 7 percent increase from the same time last year. Apple earned $8.7 billion, up 12 percent from last year.

AN AR EXPLOSION ... MAYBE

Tim Merel, managing director of technology consulting firm Digi-Capital, believes Apple's entry into AR will catalyze the field. His firm expects AR to mushroom into an $83 billion market by 2021, up from $1.2 billion last year.

That estimate assumes that Apple and its rivals will expand beyond AR software to high-tech glasses and other devices, such as Microsoft's HoloLens headset.

For now, though, nothing appears better suited for interacting with AR than the smartphone. Google already makes AR software called Tango that debuted on one Lenovo smartphone last year and will be part of another high-end device from Asus this month.

But it will be years before Tango phones are as widely used as iPhones, or for that matter, iPads. Most of those devices are expected to become AR-ready when the free iOS 11 update hits next month.

Nearly 90 percent of Apple devices powered by iOS typically install the new software version when it comes out. Assuming that pattern holds true this fall, that will bring AR to about 300 million Apple devices that are already in people's hands.

BEYOND THE IPHONE

If the new software wins over more AR fans as Apple hopes, analysts figure that Apple will begin building AR-specific devices, too.

One obvious possibility might be some kind of AR glasses tethered to the iPhone, which would allow people to observe digital reality without having to look "through" a phone. Once technology allows, a standalone headset could render the iPhone unnecessary, at least for many applications.

Such a device could ultimately supplant the iPhone, although that isn't likely to happen for five to 10 years, even by the most optimistic estimates.

Apple on Thursday disclosed its steepest quarterly decline in iPhone sales since the pandemic’s outset, deepening a slump that’s increasing the pressure on the trendsetting company to spruce up its products with more artificial intelligence.

The 10% drop in year-over-year iPhone sales for the January-March period is latest sign of weakness in a product that generates most of Apple’s revenue. It marked the biggest drop in iPhone sales since July-September period in 2020, when production bottlenecks caused by factory closures during the pandemic resulted in a delayed release of that year's model.

The current iPhone downturn was the main reason Apple’s revenue for the latest quarter decreased 4% from last year to $90.8 billion. It marked the fifth consecutive quarter that Apple’s revenue dipped from the previous year. Apple’s profit in the past quarter totaled $23.64 billion, or $1.53 per share, a 2% dip from last year.

But both Apple's revenue and earnings per share came in slightly above analysts projections, according to FactSet Research. Apple also predicted its revenue for the April-June quarter will rise modestly from a year ago, which would end the recent streak of erosion.

Part of the iPhone deterioration during the first three months of the year stemmed from a big boost in sales during the same period last year when Apple said it was filling pent-up demand caused by pandemic-driven shipment delays.

Even as it stumbles slightly, Apple remains one of the world’s most prosperous companies. The Cupertino, California, company hammered home that point by announcing a 4% increase in its quarterly dividend to 25 cents per share. The company also committed to spending $110 billion buying back its own stock, a move that investors cheered but may fuel criticism that Apple is spending more money catering to Wall Street than creating more innovative products.

Bolstered by the increased dividend and stock repurchase commitment, Apple's shares rose nearly 7% in extended trading after the news came out. The stock price has fallen 10% so far this year, erasing about $300 billion in stockholder wealth.

Although investors have been dismayed by the weakening iPhone sales, they are also concerned Apple may be losing its edge as other tech giants such as Microsoft and Google sprint out to the early lead in artificial intelligence technology that is expected to reshape the industry and technology.

The latest quarterly report “leaves no margin for doubt about Apple’s current state of affairs,” said Investing.com analyst Thomas Monteiro. “More than ever in the past decade, the company needs new products and solutions.”

Apple is widely expected to unveil more AI services in June during an annual conference showcasing the next version of its software for the iPhone and Mac computers.

“We believe in the transformative power and promise of AI and we believe we have advantages that will differentiate us in this new era,” Apple CEO Tim Cook assured analysts during a Thursday conference while promising more details will be announced soon.

Weak sales in China were again a factor in the latest quarter, with revenue in that region falling 8% from last year to $16.37 billion as rival smartphone makers gained ground in one of the company’s largest markets. Even so, analysts had been anticipating an even bigger sales decline in the results, providing investors with a measure of relief.

Apple had a few bright spots in the past quarter too, most notably in its service division, which saw its revenue rise 14% from the year before to $23.87 billion.

The division reaps a significant portion of its revenue from a lucrative deal that locks in Google as the search engine that automatically answers queries on the iPhone — an arrangement that is a focal point of an antitrust trial currently wrapping up with closing arguments in Washington this week.

Commissions collected on digital transactions within iPhone apps are also a major revenue source within Apple’s services division, an area being targeted in a U.S. Justice Department lawsuit alleging the company is running an illegal monopoly that locks out competition to the detriment of consumers.

That case is expected to take several years to resolve, but European regulators already are forcing Apple to allow more alternatives to its proprietary iPhone app store as part of the Digital Markets Act.

FILE - In this June 16, 2020 file photo, the sun is reflected on Apple's Fifth Avenue store in New York. Apple will reports earnings on Thursday May 2, 2024. (AP Photo/Mark Lennihan, File)