Apple had a good run under Tim Cook. No company on planet earth earned more profits during Cook’s tenure as CEO and co-founder Steve Jobs’ hand-picked successor. Indeed, we can call the Cook Era Apple’s Golden Age of Growth.
Alas, those days are gone. While profits continued to climb, iPhone, iPad, and Mac sales have stagnated. Apple will no longer divulge how many of each product are sold each quarter (following in the footsteps of, uh, oh, well– every technology gadget maker) and that alone marks the end of the company’s growth era.
The End of Apple’s Golden Age of Growth does not mean the company will not continue to grow. Customers want new iPhones, new iPads, new Macs, and all the accessories that go with each purchase. Indeed, over the past few years Apple has jacked up prices on every product so the average revenue per device has gone up accordingly. More revenue. More profits. Apple’s Services group is the second largest revenue and profit source after iPhone and it’s growing fast.
It won’t matter. There is a limit to how much money Apple can extract from the company’s customer base and even in the era of app subscriptions, music subscriptions, and services, one very basic rule has not changed.
Apple is a hardware company.
Where would the Services segment of the company’s highly profitable businesses be without hardware sales? Yet, hardware sales are not growing, so how is it that Apple’s overall revenue and profits continue to climb?
Services? Yes, but that is only part of the story. New products– Mac mini, MacBook Air, iMac Pro, iPad Pro, Watch, iPhone Xs and Xs Max– all have higher price tags. That translates to higher gross margins which help to push up revenue and profits on each device sold. Apple makes more money selling the same number of goods.
Unless and until Apple comes up with the next great thing– and it won’t be growth from Apple Car, Apple Television, Apple Glasses, or even Watch with a blood glucose monitor built in– and soon, the company’s fortunes are tied to a customer base just north of a billion. That’s a number big enough to keep Apple profitable for years, but not sufficient for Apple to grow beyond the Tim Cook era.
Why not? Apple is a hardware company.
Co-founder Steve Jobs kept Apple in the running with upgraded Macs, a lean and mean product line, and bet the farm on Apple Stores, the iPod and iTunes, iTunes Music Store, Intel Inside, iPhone and iPad; all of which disrupted one market after another.
What of CEO Tim Cook? No CEO has managed to grow a company’s revenue, profits, and stock price in less than a decade than Cook. Yet, Cook’s legacy may well end up being The King of iPhone Accessories than the man who made Apple great. Jobs made Apple grow. Cook made Apple grow on top of Jobs’ successes. Apple is a hardware company without new products to help fuel the growth engine and that means the end of Apple’s Golden Age of Growth.