Ignore all the dumb-assed memes and link-bait headlines you’ve read over the past year about how Apple is changing, or Apple is pivoting, or how Appe’s business is different because Services and Wearables.
We’ve sounded the alarm at Mac360 before and we sound it again today. Apple is a hardware company. Without hardware, Apple is a rather boring company with a colorless logo and a few hundred stores that would close quickly.
Hardware Is Hard
Is Apple a hardware company? Or, a software company? That’s easy. More revenue and profits come from hardware than software. Is Apple a hardware company? Or, a Services company? On the surface, that might seem obvious, too, because the Services group of revenue and profits actually brings in more money than Mac or iPad. Combined. Almost.
So, is Apple pivoting to be a Services company? Let’s move on. Is Apple more about hardware than it is about Wearables, the new kid on the block? Here’s the deal with this comparison. Wearables are hardware, too. So, if you check out Apple’s most recent financials you’ll see a breakdown something like this.
- iPhone – $25.9-billion
- Mac – $5.8-billion
- iPad – $5-billion
- Wearables – $5.5-billion
- Services – $11.4-billion
The way I do the math shows me that hardware comes in with a total of around $42.2-billion vs. non-hardware (Services) at a mere $11.4-billion. So, no, Apple is not transitioning into Services. No, Apple is not pivoting into Services or media content or anything else that is not already hardware and that hasn’t been around awhile.
Apple has had a Services revenue stream for as long as I can remember paying attention to Apple. Wearables are nothing new. Hello! iPod shuffle. All that is happening is Apple moving forward and continuing to diversify the product lines and that means more revenue and profits that go beyond the Mac, iPhone, and iPad. Think Watch, AirPods, accessories, et al.
Something else has happened at Apple in the past year. Yes, I think the company recognizes that its true North is hardware, hence every new hardware product has received a price increase in the past year. Based on Economics 101 and the hard truth about supply and demand, does that mean fewer hardware sales? No.
Look around Apple is on sale this past year. Not so much at Apple Stores, but definitely everywhere else. Amazon, Best Buy, Target, B&H, and many other big box stores and online properties. It appears as if Apple raised prices so it could lower prices with third party retailers and thereby sell more hardware.
Without hardware, Apple isn’t Apple.