A growing number of technology companies are printing money. From Amazon and Apple to Google to Samsung, the money pile from ever increasing profits has reached a point where some companies don’t know what to do with it all.
Let’s look at two favorites. Google and Apple. Google remains wildly profitable despite spending tens of billions to diversify from the money machine of search engine advertising. Critics call Apple the iPhone company because that’s where the majority of revenue and profits lie.
Diversify Or Die
Way back in the day I worked for my share of startups and I learned a couple of phrases that you hear repeated here and there; if not in words, in deeds. The first applies to Google. The second applies to Apple.
Google has been in diversify mode for a decade and invested heavily in technology and acquisitions, few of which seem to have made much of a dent in the status quo of advertising revenue. More than 90-percent of what Google makes is made the old fashioned way. Advertising.
The search engine giant jumped through a number of hoops to rename and rebrand itself to Alphabet. You know. Like Amazon is everything from A to Z (see the logo), Google’s Alphabet parent company wants to build an alphabet of profitable companies. Starting with G for Google. Or, maybe X. The X.com X company was started by Google’s founders as a secret subsidiary of Alphabet, Inc, ostensibly to create the next great thing; moonshot products of the future.
Lewis Lin has a list of Google product failures from Wave to Plus to Glass (LifeWire has a longer list). YouTube? Google bought that. The basic facts are obvious. Google is filthy rich thanks to advertising. Google does not have another significant revenue or profit stream beyond advertising despite tens of billions spent on acquisitions and investments.
What about Apple? Think shareholder value.
Yes, Apple is the iPhone company. But our favorite iPhone maker has been profitable for many, many years; from Mac to iPad, from iTunes to Apple’s services and in between, it almost seems as if Apple is a money machine. Or, rather, a bunch of machines of various sizes that print money with ease.
iPhone owns over 80-percent of the entire smartphone industry’s profits and more than half the revenue. The Mac itself has barely double digit market share among PCs, but owns half the industry’s profits, and an outsize chunk of revenue share thanks to the premium branding with hefty gross margins. Add iPhone to the Mac and Apple is the largest PC vendor on planet earth.
In other words, virtually everything Apple sells makes money hand over fist, and to the point where Apple has so much cash the board of directors, Tim Cook, and the executive staff have no idea what to do with it all. Some goes into wasted share buybacks. Other piles of cash go into wasted dividends for undeserving shareholders (think shareholder value, #2 on my list of business phrases).
Whatever Apple does, like it or not, seems to make money. iPhones continue to sell at record levels and higher gross margins than Samsung or any competitor. Ditto for the Mac, iPad, Watch, Beats headphones, retail stores, and even Services (iTunes, Apple Music, App Stores, et al).
If Google is a money machine, and it is, then what is Apple? It’s money making factory of money machines.