Apple's financial dependence on the smartphone is increasing
bloomberg.com
bloomberg.com
It's a nice touch that both graphs show the iPhone's share of revenue and units sold, rather than totals, thus obscuring the incredible growth in both numbers.
Add the fact that the company has not had a new breaking star since Jobs died and that they are playing catch up with the other players on innovation - the chances of serious trouble in the future - while slim, are not nonexistent.
To be fair, has anyone had a 'blockbuster breakthrough' in innovation in the past 5 years (since Jobs died)?
I honestly think that innovations in consumer tech have more or less stalled as the lower hanging fruit was picked a while ago. What's left are more of the bigger issues, like energy and self driving cars.
I know Jobs had a great sense of aesthetics, but he seemed like he had a very rational side too? I could picture him thinking most people won't care about repairability on products under a thousand dollars? I don't think he would he would be o.k. with that same philosophy on a 5 grand computer?
I think the last thing he would want for Apple products is any scuttlebutt along the lines, "There products are great, until they breakdown?" A major part of their success is the beauty(not just aesthetic) of their hardware?
Sometimes, I really do think Jobs was Apple? Sorry, under his leadership, I don't recall many complaints/bugs not actively being solved? Yes, there were always Apple haters, but even the worst complainers had less to complain about--right up to his death? I recall, even when he was in home palliative care; he was still designing/thinking about Apple products? I know he was probally difficult to work for--maybe mean, but I really miss the man!
The trend of less 'repairable' Apple devices was around during during Jobs' time as well.
I believe that Jobs, and the rest of current Apple just don't care as much about people opening up MacBooks as much as they care about making thinner, faster, more attractive devices.
Remember that he died because he thought a fruit diet could cure his cancer instead of real medicine.
Apple seems like a one-trick pony only in relation to the gargantuaness of the iPhone pony and the relative sparsity of ponies in the rest of the marketplace.
Apple does more than the iPhone. They have a profitable computer business too.
So it's only worrying thing for Apple if they start relying on that single product. If they keep (fixed) expenses down so they can live without the cash cow, then it's no problem.
It's very often the high fixed expenses that get you. Same with people getting a new job where they earn less: the unsellable expensive house is a problem, eating out too often is not an unfixable problem.
But what new markets are there for Apple to enter? People think the electric car market is a right fit for Apple. The article says that the global premium car market as a whole is currently only worth 220 billion dollars per annum ( don't know whether this includes the premium compact market as well ) which is not much when considering the fact that iPhone's sale for previous 12 months was 100 billion. And the automobile market is highly competitive with plenty of incumbents with over 100 years of experience. Perhaps Apple could transform the business model of the market to make it much bigger, But like with the smartwatch, Apple is possibly late to the game, with Tesla, Google, Uber, all working frantically to do the same (each with their own vision and approach). In my personal opinion, Apple still has plenty of room to enter and exploit the market.
In conclusion, investors are worried whether Apple's party of year-over-year growth in revenue and profits which it has sustained over the last decade is finally over.
That totally depends on how you define "problem". I believe the market will definitely have a problem with the current asking price of the owners for 1 share of the company if the iphone stops being a thing. This will make the owners very worried indeed.
A stock market crash is always coming. If you can't say if it's coming next month, next year or next decade, then the statement contains no information.
And you complain about a statement containing no information?
The thing is, no one knows exactly when a crash will happen.
But some people know that one will happen say, within the next five years, and that it's going to be worse than 2008 and 2001 because the underlying problems have only been getting worse.
Listen gais!!!! A market crash is comming! I read it on a blog. Brace yourselves! (You heard it here first)
Do you also think Greece's problem of having way too much debt was fixed by loaning it ~80B dollars more?
Steve Jobs died less than four years ago. The iPhone is a once-in-a-generation blockbuster product. I think your expectations are a little high.
Opportunities have been missed. Just one example: Apple could have owned the DIY video content market, as they did with audio podcasts and apps, with all the synergies for hardware and software sales and training that would have created.
Instead they've handed it to Google/YouTube.
Apple is practically indestructible as a company at the moment, but I can't see the momentum continuing ten years from now without something new and amazing escaping from Cupertino - maybe like Amazon's Echo, but even better.
Jobs succeeded because he could always be persuaded to leave a space for users to add content. Podcasts did that, so did apps - and both changed the industry.
Cook seems more like a top-down kind of a guy, and less focussed on users. That's not a good thing at all, IMO.
Also you mention opportunities being missed. Can you please expand ?
I think saying that Apple is playing catchup on innovation needs to be flushed out, but you're right that the possibility for serious trouble is slim, but not non-existent. However, is the possibility for serious trouble greater than, say, for Google? Google is facing European regulators unhappy about a single firm controlling 90% of the searches. The iPhone and OS X are going to have ad-blocking with iOS 9 and OS X 10.11. Think of all those iPhone users now blocking ads. The iPhone is 44% of the market in the US.
All companies face threats to their future earnings. Walmart faces Amazon and potential wage increases. Apple faces consumers deciding they don't need a new iPhone. Google faces regulatory unhappiness about monopolising information access combined with loads of iPhone users turning on ad-blocking. Heck, Google faces the potential of Apple switching to Bing as the default for the iPhone and drawing a lot of traffic away from Google (and iPhone users tend to punch above their weight in terms of dollars spent and time on device compared to Android users). Microsoft faces everyone moving to mobile and Windows and Office becoming relics of the past. UPS and FedEx face the prospect of Amazon and others using automated delivery methods. The auto-industry could be facing self-driving cars from new entrants including Apple and Google while self-driving technology poses a threat to their very existence as an independent industry. Heck, with self-driving cars, it's simple for anyone with a bit of capital to create a viable Uber competitor in a way that is extremely difficult when recruiting human drivers - Uber could be disrupted before it even becomes profitable. The point being that companies face a bunch of threats to their long-term profitability because of a lack of diversification.
It would be great to see Apple more diversified, but I think your suggestion of "slim, [but] not nonexistent" is the right attitude. It would be great if Apple were more diversified, but it would be great if a lot of companies had easy, public answers to how they would deal with a major disruption to their main revenue source. I'm sure Apple is thinking about this a lot.
I remember those failed attempts to rejuvenate the Mac OS and not having any significant Macs sales on my country besides a single importer company on the capital.
Before the Jobs/Cook era, Apple used to have terrible inventory management, that isn't a problem any longer.
Apple used to be extremely dependent on third-party distributors, they now are one of the most profitable retailers in the world, they also have built wide distribution networks far beyond "computer stores"
Back then, Apple had burned through most of the company profits, Jobs and Cook built a tidy trust fund worth approximately $250 billion cash-on-hand
Apple is in a far better position now to handle a debacle or stagnation, assuming one was to happen.
but yes, I do agree that innovations on the scale of GUI desktops and touchscreen pocketable computers take place once every several decades. Interesting that the same company was largely responsible for bringing both of those to market, though...
> It's a nice touch that both graphs show the iPhone's share of revenue and units sold, rather than totals
Yes, because it's the only kind of graph that's relevant in this case.
Per this 2011 article (http://www.nytimes.com/2011/09/28/business/media/researching...), Kleenex has a 47.1% share of the facial tissue market. I assume these numbers reflect the U.S. (rather than global) facial tissue market.
Per this recent article (http://www.macrumors.com/2015/09/03/iphone-us-market-share-c...), Apple has a 44.2% share of the U.S. smartphone market.
Although the text of the article doesn't say it explicitly, the title of this article effectively screams "Apple isn't well diversified! Its making too much money on one thing!" I really don't see the sky falling here by any means. Barring a seismic shift in the smartphone market, Apple will continue to dominate the smartphone market, making obscene amounts of money; they will probably also continue to innovate. And Kleenex will continue to dominate the facial tissue market.
Apple is certainly going to continue making a lot of money from the iPhone but they haven't innovated a single thing since the iPad. Actually, they've been playing catch up on pretty much every single front and they are still way behind on quite a few (e.g. wireless charging, NFC, ...).
It is highly unlikely the current #1 will not be #1 forever.
I guess the question for investors is is could Apple loose market share in the future in the same way Blackberry or Nokia did in recent history?
Kimberly Clark is an extremely diversified company in the home goods and HBA market. Some of the brands they own:
Kleenex, Scott, Huggies, Pull-Ups, Kotex, Poise and Depend
Imagine that its 1984 and you've just used the same argument, substituting 'IBM' for 'Kleenex'...
If you're going to paint Apple as being vulnerable, you need to say vulnerable to what. In every major market Apple competes in they have never looked healthier, and their competition has never looked weaker and with so few cards left to play.
(1) http://www.samsung.com/us/aboutsamsung/investor_relations/fi...
I don't think so. The iPad, iPod and iTunes sales are suffering and the Apple Watch and Apple Music are lagging and facing huge obstacles in making headway in the market.
So, this leaves Apple with the iPhone and Mac products that are keeping it afloat and if we factor into our calculations that the iPhone is getting old and slowly tiring, we can see that Apple will be in for a bumpy ride in the next 5 - 10 years that it should be ready for.
iTunes sales are also peaking because streaming is taking over. It's too early to say how well Apple Music is doing, but there's no indication it's in trouble.
Apple Watch has significantly expanded the smart watch market and taken over 75% of it. What is that supposed to be lagging exactly?
As for the iPhone, the latest models are as fresh as ever and the whole point of the article this thread is based on is how spectacularly successful it is. What gives you the impression that it's in any way tiring? Sales? Revenue? Margin? All as healthy as ever. The demise of the iPhone has been predicted for all the 8 years it's been on the market, but the fact is there's no indication that it's anywhere near peaking yet.
More impressive perhaps is that Apple's $50 billion in profit the last four quarters, is nearly equal to the combined profit of: GM, Ford, Daimler, BMW, Toyota, and Volkswagen.
It's a company that literally makes so much money it doesn't know what to do with it.