Although sales of the iPhone have faltered recently, it is still exceeding analyst expectations

Apple's future lies with AI and augmented reality says CEO

Apple CEO Tim Cook has said his company is working on artificial intelligence (AI) and augmented reality technology in a bid to reassure investors amid flagging iPhone sales.

He stressed that Apple is "high on [augmented reality] for the long-run" and investing heavily.

Augmented reality, in which computer-generated content is overlaid on the real world, is one of the latest fixations in the technology business.

The technology has seen particular prevalence of late due to the runaway success mobile game Pokémon GO.

Cook also highlighted Apple's investment in AI, which the company now uses to recommend content to users and even spot usage patterns to improve a device's battery life.

Hi comments offer a limited view into the company’s future which is typically notoriously secretive about its upcoming products. But analysts said Cook must do more to show his cards as sales of the iPhone slow.

But it is not all doom and gloom for the world’s most valuable company. Although iPhone sales declined for the second straight quarter, Apple still managed to sell more devices than Wall Street expected and its revenue in the current period tops many analysts' targets, soothing fears that demand for the company's most important product had hit a wall.

Apple said it sold 40.4 million iPhones in the third quarter, down 15 per cent from the year-ago quarter but slightly more than the average analyst forecast of 40.02 million.

The fall in iPhone sales last quarter is the first time this has happened since the gadget's release in 2007, dropping 16.3 percent.

Augmented reality and AI are often regarded as an uneasy fit for Apple, a hardware maker that tends not to embrace new technology until it matures.

Apple's habit of keeping quiet until it has a finished product to show, in contrast with rivals such as Google and Facebook, which iterate products in the open, doesn't help, said analyst Bob O'Donnell of TECHnalysis Research.

"They're in this weird position where they want the world to know that they are working on it, but they have nothing to show for it," he said.

As rivals such as Google and Facebook double down on augmented reality, Apple has made no public display of its aptitude in the field. But Cook stressed that the company is hard at work behind the scenes.

"We have been and continue to invest a lot in this," Cook said. "We think there's great things for customers and a great commercial opportunity."

Apple has more to show for its efforts in artificial intelligence, where it was an early pioneer with its Siri digital assistant. But the company has been dogged by doubts that it has fallen behind rivals such as Amazon and Google and will be hard-pressed to catch up due to its strict privacy stance.

"They are running behind, and they are trying to catch up both in perception but also in fact," said Oren Etzioni, who is CEO of the Allen Institute for Artificial Intelligence.

Cook maintained that Apple had found a way to strike the balance between progressing in AI and maintaining users' privacy, detailing features in Apple's latest operating system.

"The deployment of artificial intelligence technology is something that we will excel at because of our focus on user experience," he said.

Ultimately, Cook argued, phenomena such as AI and augmented reality will only reinforce the importance of the iPhone.

The company has also long been rumoured to be developing a self-driving, electric car which was recently bolstered by reports that it is investigating electric car chargers, talking to charging station companies and hiring engineers with expertise in the area. 

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