What mature market categories have they not done well in, and how do you explain their continued success in the PC market?
They are missing the VR wave completely, or in the very least very late to market. This almost categorically removes them from consideration in the gaming market.
Windows is making huge UX improvements year-over-year while OSX updates are incremental at best.
Some recent flops: - fitness tracking - high end pcs (MacPro still has fundamental hardware/driver issues years later. It was never worth its absurd cost. 5k iMac features a mid-range GPU from 2012) - voice assistants - business productivity software (iWork)
The VR wave is just starting. The only VR devices that will matter in 10 years will be standalone mobile devices in the $500 price range. When I look at Oculus's technical achievements I don't see anything difficult for Apple to copy. On the contrary, I think Apple's mobile chip design expertise, vertical integration, and developer base put them in a great position to release a great mobile VR device. Apple is probably the strongest company out there in power efficiency, which is the central limiting factor for mobile VR.
Frankly, I think Apple should sit out this generation, and let Facebook/Microsoft et al spend the money to do free market research for them. They can just do R&D behind closed doors until they have something special. VR with a cable tied to a giant PC is cool, but it will never be a big market by Apple standards.
Where will Apple be when there are VR devices in everyone's Christmas stockings? That's the question.
Not really. Very much remains to be seen what the big thing in AR/VR will actually be.
Also, how can you call them a failure at fitness trackers? They are by far the most profitable maker of fitness trackers.
As for missing VR; VR hasn't gotten off the ground yet. It's barely taxiing. Frankly, if Apple were to jump in anytime in the next year or two, it would probably fit their usual MO for when they join a market.
Edit 1: Downvoters you realize the Mac (Laptop/Desktop) Division is 9.4% of Net Revenue? Source: http://files.shareholder.com/downloads/AAPL/2074014299x0x888...
- Non-trival amount of resources go into hardware R&D and OSX development
- Desktop and laptop computer market is increasingly shrinking
- Revenue growth is flat
It's not as simple as "well we make $x for every iOS developer, $x/2 for every OSX developer and that's going to be $x/3 in 5 years" but that's the general gist of it. Consumers are not buying computers and Apple has never been a major business player.
Furthermore Apple's revenue growth may be flat, but their competitors are in actual decline.
Consumers are increasingly buying apple computers instead of any other, and this is increasingly true in enterprises as well as consumer spaces.
The percentage of Apple's business that is represented by PCs will obviously decrease as they add other business lines. What does that have to do with anything?
1. A very large portion of their OS X development is directly applicable to what goes into iOS. And it's becoming more so. The same for their hardware R&D and what ends up being usable in their mobile products.
2. The consumer desktop and laptop market has been shrinking, because consumers have switched to mobile. Which is most of Apple's income.
3. Growth may be flat, but the margins are good, which exactly what BH is looking for.
Finally, and most obviously, Apple needs computers in order to make software for mobile. They own pretty much the whole stack and are able to make a hefty profit by selling their tools (hardware and software), that they would need anyways, to the rest of the world. This is classic vertical integration and it makes alot of sense business-wise.
>While they've been profitable in the PC space (laptops/desktops) to call them successful is a bit of stretch.
You say
>Apple's margins are rumoured to be a large multiple of that of other laptop makers.
So we agree they're profitable but you are simply arguing they are so more profitable their volumes don't matter.
So do they? If we want to break out numbers [1] from March 2016 quarterly report. Mac (Laptops/PC's) accounts for $12.5bil Net Sales, which is 9.4% of quarterly sales totally <11 million units.
The funny thing about this is their Services category (iCloud, iTunes, App Store, Apple Health Kit) has (more then) doubled in 6 months and its now ~$3bil of Net Sales of their Mac category. At current growth rate's it'll eclipse it sometimes this year.
The Mac sector is quickly becoming the lowest selling division of the company. Currently only under performed by the Other category (Beats, AppleTV, AppleWatch, Cables, WatchStraps, Keyboards, Mice, etc., etc.). This is what I mean by surviving not thriving. The division is a very small corner of the company, and getting smaller.
[1] http://files.shareholder.com/downloads/AAPL/2074014299x0x888...
I don't think that matters when you're looking at it from a value perspective, as BH does. The margins are the best out of anyone in that sector and it's making tons of cash. And, as you said, that's one of the lowest performing divisions of the company. They're basically the BMW of laptops and you're acting like that's a bad thing.
It turns out you can enjoy network effects as well: at one point iPods accounted for over half of the global flash memory market. That was surely useful in bringing the iPhone and MacBook Air to market, no? I'd also say the PA Semi investment is paying off since Apple has owned the mobile SoC performance crown for a while now, with no competition in sight.
But high margins without a monopoly is a tough course to chart indefinitely. I think if Apple is still the incredible player it is in another 30 years, it'll probably be because they've integrated cloud accounts + hardware + security to the extent user abandonment of their platform is almost unheard of.
PS: Surprised no one pointed out my incorrect Apple ticker *AAPL
They are very successful despite not selling the most units and not seeing explosive growth.
In the most recent financial data I could find, Lenovo reported total company revenue of almost $13 billion, and Apple reported Mac-only revenue of just over $5 billion. So again: not the leader but doing a lot more than just surviving in the PC space.
Also, comparing the Mac business to Apple's other businesses is irrelevant - you may as well compare it with Pharmaceuticals - the relevant comparison is to other PC vendors, wherein you will find that they are highly profitable.
Since that has probably increased eg "Mac laptop revenues rose by 10.9 percent during the first six months of 2015, year over year, while Windows PCs fell by 9 percent, and Chromebooks contracted by 9.5 percent."
Not bad really.