According to analysts and critics, Apple is doing it already by becoming a services business– thanks to the rapidly growing Services segment of Apple Inc. Uh, no. Apple is not a services company despite what you read.
Here’s the deal and this one cannot be refuted. First and foremost, Apple is a hardware company. Yes, the company sells other products, often lumped into the fast growing Services category; apps, AppleCare, Music, iTunes, Apple Pay, Google, blah, and blah. This is nothing new and Services has been around for a few decades. Apple has about 1-billion customers now, so you might expect Services to be growing. It is. Why? Because iPhone. Or, just because 1-billion customers and growing at 100-million a year.
Apple’s so-called shift to services, largely prompted by falling iPhone sales, has been much discussed…
Yes, and mostly wrong. The shift to Services was not prompted by falling iPhone sales. Services have been around for many years, and growing fast because Apple’s installed base has been growing fast.
Installed base? Yes, hardware customers buy services. Apple claims to have nearly 1.5-billion Mac, iPhone, Watch, and iPads in the wild, a billion or so customers, and they like to buy things from Apple (see the aforementioned list). Try this idea on for size.
As iPhone sales have tapered off, Apple has been putting increasing focus on growing its services business.
Yes. But Apple is not shifting to become a services company. Without the 1.5-billion hardware products in the wild, what would Services be? Deflated.
What started out as cloud storage and extended support contracts, Apples’ “services” revenue sector has expanded to include Apple Music and will soon likely expand further to news, video and gaming.
Don’t forget that iTunes has been around a few years and dominated the music and media industries long before Netflix or Spotify. Both App Stores, too. Services is nothing new to Apple, but it has grown faster in recent years because Apple adds more to the Services category, and the hardware customer base has grown immensely in just a decade.
Let’s look at the bigger picture.
Apple has pledged that, by 2020, its services business will be double what it was in 2017. However, hardware in general — and the iPhone in particular— still dominate companywide revenue.
A 15-percent annual growth rate won’t last forever, but doubling 2017’s Services revenue won’t be much of a challenge– as long as Apple continues to add new hardware customers by 100-million or so per year. Even newbies need services.
Notice the kicker?
Hardware in general… still dominate… revenue.
The Wall Street journal reports that the tech giant is “shaking up leadership and reordering priorities across its services, artificial intelligence, hardware and retail divisions as it works to reduce the company’s reliance on iPhone sales.”
I have some reluctance to trust WSJ, Wapo, NYTs, and Bloomberg because their headlines are wrong so often and their details and sources are as threadbare as all of Obama’s so-called illegal and unconstitutional acts (remember those?).
Look at what is obvious. Apple sells hardware. Apple sells services for customers to use on their hardware. Apple has a billion or so customers and about 1.5-billion pieces of hardware in the wild. That means as Apple adds more services and products to Services, it grows.
But, no, Apple is not a services company. Services is a part of Apple.