What is Apple’s next great thing? To hear market analysts, and anti-Apple critics tell the story, Apple of the future is all about Services. After all, Services makes more money than iPad or Mac?
Apple has somewhere north of a billion customers and adds about 100-million or so new customers every year, so it stands to reason that any so-called services that Apple provides to the customer base will benefit both the ecosystem and the bottom line.
There’s just one problem with the Services meme.
Apple. Is. Hardware.
Depending on the day of the week and the imagination of various technology writers on a slow day, Apple is transforming itself into a Services company. Until Apple starts renting out Macs and iPads and iPhones, Services remains what it always was.
A part of Apple. Services is not apple.
Services is something of a catchall group of products that can be defined as revenue without hardware. Mac, iPhone, iPad, Watch, Apple TV, AirPods, Beats headphones, and all the accessories you can buy from an Apple Store are hardware. Some are major products. Some are accessories. They have a few things in common.
First, they’re all hardware. Second, they work better with other Apple products than as standalone options within other ecosystems. Think iTunes on Windows, or Apple Music for Android.
Second, all of them have Services components; App Stores, iTunes media mall, Apple Care, and the list goes on. Services have been around Apple for a couple of decades but as the customer base has grown– from about 20-million Mac users, to 200-million iPod customers– to more than a billion Mac, iPhone, and iPad customers– the Services component has grown, too.
Today, Services accounts for more revenue and profits than iPad or Mac. That’s no mean feat because both are tops among tablet and PC makers. Services is Apple’s fastest growing revenue and profit stream. How so? Actually, it’s easy since iPhone, iPad, and Mac sales have hit something of a wall in recent years.
What that growth means is that Apple is better at extracting additional revenue and profits from the customer base than Google, Microsoft, Samsung, or other technology competitors.
Just make sure to understand the obvious amid the hype. Apple is a hardware company. Services is, as it always has been, a part of Apple Inc. Services is not Apple and Apple is not transitioning into a services company.
That. Is. Nonsense.
If hardware sales drop, guess what happens to Services revenue? Without an increase in the customer base every year, then Services growth will begin to slow and eventually pleateau.
Services are a part of Apple, and not what Apple will become.
