Apple Had Five Ways to Fuel Earnings. Only One Still Works

What's happening is that it's been too long since they introduced something that was not an incremental upgrade.

This. It's hard to explain but it's the same with the keynote events. They used to be exciting to particular class of nerd such as me. Now they seem to be more about the celebrities in the audience and the cheesy looking people in the product videos.

I assumed that they were just switching to a more popular and lucrative demographic based of who buys iPhones.

The current Apple makes more money now but the products and the way they are marketed are boring IMHO (subjective I know).

I own the very same 12" iBook G4 from 2004, and it ran Mac OS X 10.3 Panther. It was a beauty.

But the market has shifted dramatically since 2004. Outside of software devs and people who need laptops for work/school, the number of people who own a personal laptop has significantly decreased since. (can google stats if needed) Plus there's a whole demographic of people who have never owned a laptop and don't see the need.

I'm a techie and I haven't owned a personal laptop since 2007. I travel with my iPhone and iPad Air 2, and they're more than good enough for my needs. I have Linux desktops at home/work. Even if Apple made a really innovative laptop computer today, its target market is a lot smaller than it was in 2004.

It would help if the MBP were actually a professional level device instead of being a souped-up, hyper-expensive consumer laptop.

That would mean more ports, a higher minimum spec, and the ability to upgrade the internals. The touchbar could be dropped entirely, it’s really just a marketing gimmick.

I suspect Apple is working through a long-term secret plan to phase out all MacOS products and replace them with upgraded iPad Pro devices instead. With some increased hardware resources and iOS enhancements, iPads could eventually meet the needs of most knowledge workers and content creators. Until that plan comes to fruition I suspect Apple will put minimal effort into their existing line of laptops and desktops.

A vocal minority of power users and developers will hate being forced onto iOS, but most customers will be satisfied. And Apple will be able to consolidate their engineering work behind a single platform.

Reducing prices almost certainly means reducing profit. Which means now they're in a market that is delivering shrinking revenues and profits.

Because when you do not largely innovate, it doesn't matter if you are in a large market or not it signals grave danger. Apple knew this years ago when they started their large services push (i.e. collecting rent). Apple has a good challenge in front of them for the next 5 years, they have enough cash in the bank to ride it out and try some moonshots, but there will be some big changes/chances in the next 5 years, and I'd be willing to bet that Cook will leave as CEO by 2024.

It's only a problem if you're a public company and have shareholders. If you're private, it's not really a serious problem if you have a large enough buffer to support current operations. I think Bloomberg is in the latter category. Revenues from selling their terminal have declined every year for awhile, but since they're private, they're not panicking as much.

Because for shareholders, the stock price only appreciates if the company grows.

In many ways, it mirrors the issues for Hacker News entrepreneurs. To get VC capital, you have to dangle promises high returns on your equity — even if a consistent cashflow business is a great outcome for an entrepreneur (these businesses are pejoratively called "lifestyle businesses").

it's not "seen as a problem," the company just gets valued differently if growth is expected to slow

> Why does the company need to grow if it's profitable as it is?

This is how capitalism works. Everything has to be growing all the time, or it's seen as failing. Requiring infinite growth on a finite planet is a problem, but so far all the alternatives are considered fringe: https://en.wikipedia.org/wiki/Steady-state_economy

> Why does the company need to grow if it's profitable as it is?

The word "profitable" covers wide range of possible outcomes.

It's current valuation is based on an assumption that the revenues will continue to grow significantly.

If it turns out that in reality the revenues will be stable/stagnant, then the owners of Apple are in for a rude shock (since it'd mean that Apple is worth much, much less), would not consider this situation as acceptable, and would be ready to install new management and approve radical changes to try and continue growth (of both revenues and share value) by any means possible.

I agree, that has always bugged me as well. Growth is not the end goal, it's the desired temporary state for a company to make profits.

Here's a serious question: what should the valuation be for a company that is not growing, but generating $X amount of profit year after year, with no risk, forever (and assuming the profit keeps up with inflation).

Logically, companies are valued on their expected future profits. Since you want those to be as big as possible, growth in general is good. But at some point, in rare cases, a company may get so big that it has reached the point where it's just extremely profitable. Wasn't that supposed to be the end-goal?

A publicly traded company needs to either grow or pay an attractive dividend. Otherwise investors will put their money into companies which can provide those things.

>I find it odd that being a big in a large market that isn't growing (like the mobile phone market) is seen as a problem. Why does the company need to grow if it's profitable as it is?

It's anything but odd. That's the basis of how the stock market works. If Stock XYZ is big in a large, not-growing market, and trades at $50 per share... why would the stock price ever appreciate?

As several people have pointed out, the stock market investors care. But putting that aside, a company can be profitable with a stock price of $0 (though not likely). So at first glance it would seem that just staying profitable is enough to get by, and technically it is. But the problem is staying profitable. If a company has been growing rapidly, then the growth slows, then the growth stops, that's a big indicator that they'll start shrinking. Of course there is a non-zero probability that they will stay profitable for quite some time, but the odds are against them.

I’ve had similar thoughts. I currently have an iPhone 6S, I’ve had it for 30 months, and don’t really have a need to change it. I remember when I started changing laptops only when they broke, and it’s a similar feeling

Apple can't make them much faster because they keep making them thinner and lighter. Each MacBook has been a very slight upgrade from the previous model since they went Retina. Often times the first of a new generation is actually slower than the one it replaced. Plus, Apple won't work with NVIDIA so their GPU is always going to be behind when compared with the PC market.

I think Apple's situation is a bit different from most PC manufacturers: because they aim for "quality/brand/recognition" they can get a crowd that is fine with replacing their computer more often even if they don't need to. "the new thingy that does mostly the same as before but new" won't work on someone who buys the $600 HP laptop. It does still work on phones, but the improvement are a lot more massive both hardware (camera especially) and software. That's why apple NEEDS to go with touchbar and new connectors magic and everything because why else would you change, already on HN you see plenty of people saying they're fine with their 4+ years old mbp.

If you rely on a "premium product at premium price" you need to make people want to have it, and for them to replace it that's either obseleting the old one, or making the new one

Downside of this of course, is that it's harder to rely on that anymore when you try to grab mass market too.

Man, we really have come full circle.

The mobile phone market was already becoming the largest electronics market in the world before Apple entered it. It made perfect sense to focus on that.

Eleven years later, there is still not a single electronic item that is larger than the smart phone market.

PC's aren't making a comeback, TV's are low margin and bulky, etc.

Of course they focused on the iPhone. As a corporation you can't blame them, focusing on that market led to them becoming the most profitable company in the history of capitalism on the planet Earth, to say that a publicly traded company should not have done that is basically economically insane (or at best naive). It is problematic, however, because in many ways the earning of massive profits was almost too easy, and that's led to a significant degree of laziness in the industry. Worse, the combination of massive profits and consolidation means that there are lots of plenty viable markets and customers who aren't being well served at present. Because the talent and capability to do so is locked up in these megacorps who can't be bothered to pay attention because they are drowning in money from the mobile devices business. There is a similar problem at google where the vast majority of the company's revenue comes in from search ads, rendering everything else the company does (even if it's important, even if it represents the foundation of a multi-billion dollar business) basically "for funsies" in comparison.

Out of curiosity, do you have that same mindset (i.e. a factor of your decision to purchase is whether or not you're willing to buy another one if the first one is unusable) with anything else in your life? Also, Applecare+ is a worthwhile deal if you're that concerned about breaking the phone (and probably even moreso now with the glass-backed phones).

Ive had many iphones. When they first came out, it was very common for all other phones to have a bracket on them to attach a lanyard, lanyards with decorative items were common.

After breaking and dropping several, i had lamented that i really wished that they had included the little lanyard bracket so i would drop it less.

I was literally told i was an idiot for not appreciating Ive's design asthetic.

Screw that. Personally, given how many times i have broken a screen, and then being told that "if you wanted to protect it, get a rugged case, all i can think is that the base design is faulty.

I dont want a case, but an unprotected phone is just too fragile. Apples response was to come out with a model which had glass also on the back.

I cant stand that people think that apple is withought fault...

Their products have always been high priced. But they need to change. Cook has destroyed entire parts of their ecosystem and people have been moving away. Plugging my first iPod into my Mac felt polished in a way their products no longer do with one another. Even their services feel slapped onto their hardware. I shouldn’t ever get a message that my local hard drive is a limiting factor in my iCloud access or vice versa. I also shouldn’t have to wait for files to download from the cloud. Just do a network mount. That’s the sort of thing that would have been handled gracefully with Apple engineering in the past. They’ve stripped functionality out of their applications to force people to purchase software or services they don’t need - ala iMovie/FCP (to my understanding). The list goes on.

Which is why I have been using a cheap moto G for the last 5 years costs me < £150 and £7 a month.

If I lose it or drop it I am not concerned.

Another suggestion:

1) Take the latest iPhone XS

2) Give it a better camera

3) Make it iPhone-SE sized, get rid of the huge display crop

4) Include 5G support

Agreed, they basically need to reverse direction:

1. Remove the touchbar 2. Bring back magsafe 3. Bring back the old keyboard

You're right about the screen bezels but I think it being a touchscreen is more important than OLED. That's basically standard on other laptops now.

I'd suggest replacing the LCD with a touchscreen model so the touchbar can appear at the bottom of the display. This would please the handful of users who'd miss it otherwise, and anyone who'd gone out of their way to develop an interface for the touchbar wouldn't feel that their work had gone to waste.

A touchscreen could also be a step toward being able to run iOS apps on Macs. I wouldn't claim this last piece is easy, but it could be a huge win if done right.

Apple should should make iPhones and Macs work so seamlessly together that they feel like different hardware extensions of the same device. Say, starting an application like FaceTime on one device and shifting it to the other without breaking the session. (Maybe they can do this already? If not, they should.) Again, not easy, but Apple has the resources to pull it off, and if they nail the execution they could boost the value of both product lines.

Also, greater memory options in their higher end Macs. Obviously most people don't need 64 gigs of RAM on their laptops, but for those who do, Apple should be working hard to make a Mac their first choice.

For lower end Macs, include a dongle with USB 3.0, Ethernet and 3.5mm audio jacks in the base package. It wouldn't cost that much to produce and it would give people peace of mind that their old peripherals will still work out of the box.

EDIT: Oh, and fix the keyboard. They need to set a standard for keyboard quality and typing comfort and accommodate that standard. If it means making their laptops a few millimeters thicker then so be it.

Even if they revised the MBP to be everything people want on these forums, it still would not make a dent in the problem mentioned in this article (how they can grow beyond the iPhone era). There aren't enough people buying computers and many people buying the Mac really have no issue with the Touch Bar at all. If Tim Cook said that the Mac was going to be their future growth engine, he would be laughed at.

For the record, I hate the Touchbar, but I still see no suitable option in place of Mac. Linux on the desktop is still not there and Windows is atrocious (I use it for my gaming PC, but that's it).

It is important for share price speculators

The company itself is okay of course

People that overbid its shares will not be

Maps, BatteryGate, the unpopular decision to kill the jack, Butterfly KeyboardGate, the increasingly vocal unhappiness of professional users...

There are probably more, but those are the obvious ones.

It has a low P/E because it's revenue is falling, not growing.

It's not just Bloomberg. Many others have been expecting this for a while because Apple has been disproportionately dependent on iPhone revenue and they don't have some new product that will push them to the next level.

Both the iPad and Watch are not the home run product that is needed.

In many ways Apple's extended software support of their older hardware gives users even less of a reason to buy a new device. I think that shows they are a company not primarily focused on profit because they could make changes to push people to upgrade their device faster.

It seems like they need to do more with services or start buying up some other businesses with all that cash they're sitting on.

Apple tried a slow drip of already ready features for half a decade

But they couldnt do it forever

Don't worry. Many people buy new ones based on gimmicks (the notch, marginally thinner devices, etc). But they're running out of those too.

Having a reputation for low quality would kill the demand they have now. Their strategy is to entice upgrades, not to replace on breakage. Which is better, as it makes for a happier consumer that had choices on this.

BTW: did you change your battery?

Web assembly is definitely a threat to apple’s app revenues, though maybe not an existential one. Given that apple are already experiencing a slowdown, and big names like Netflix are trying to avoid the “apple tax”, I’d expect to see them fight this tooth and nail. Even to the extent of blocking wasm on some sort of security grounds, wether valid or not.

WebAssembly is native code targeted for and running in a browser virtual machine. The difference between JavaScript and WebAssembly is that there is a machine abstraction.

WebAssembly isn't a magic bullet. The UI toolkit is the browser (DOM/HTML/CSS) and that's where everything will live and die. Whether the app is executing JavaScript or WebAssembly ultimately doesn't matter that much.

Apple still has to provide a solid web browser for mobile internet and they don't seem to be too keen on that anymore. So I'm not sure where your optimism is coming from.

Also, no more annoying app updates? Web apps are even worse with no way to hold onto on old versions! You're updating every time you open the app. Are app updates really that annoying?

> Not implying Apple will support wasm, but their plateau enables other wasm-first platforms to emerge. Content providers will give away $100 phones to secure subscription revenue.

I don't understand the former has to do with latter. It would make more sense for content providers to go native than to use WASM if they are providing the hardware. If content providers are giving away hardware they'd want it completely locked down -- not open.

Also, Apple's plateau exists because the market is saturated. Everybody already has a smartphone how is there a market for yet another new platform?

10 years ago they use to?

Isn't the general server market dying because of the cloud?

The Xserve ecosystem used to be pretty neat, but I doubt it was very profitable. It’s hard to compete against cheap commodity servers like supermicro and such.

Has Apple really done much on high TPD chips? The only ones we've really seen them make are low power draw mobile chips for their phones. The rest they just use Intel chips for all their laptops and even the iMac.

I don't really see them doing it because it's not somewhere they can really get away with their usual "we control the whole stack and you can only run our software on our hardware (legally)" mess they pull with macOS.

> I realize this isn't a sexy industry with lots of growth, but neither is the phone market anymore.

Samsung figured this out already. Their proportion of revenue from phones is decreasing while their semiconductor business is growing leaps and bounds.

Please, not again. Their server hardware was such crap, and OSX really just isn't a great server OS.

Having previously had experience with their old server line, I'd prefer they don't enter the space.

It's been 143 years, and finally the fad of... phones is behind us.