Putting Apple on the Line

September 9th, 2015

Apple doesn’t get a break. Ahead of the announcement of the new iPhones and, perhaps, a new Apple TV and some other gear, the company’s success is once again said to be on the line. Or at least that’s what some want you to believe.

Now the arguments against the iPhone refresh mostly go this way: Assuming it all comes to pass as predicted, the new version won’t look very different from the old version. The changes will be mostly internal, which means they could greatly improve your experience. But since the case is the same, it doesn’t matter. It has to look different to impress them.

Of course, this argument is expressed in a similar fashion every other year, since Apple has taken this approach to iPhone upgrades since the early days. But they still don’t get it. If it looks all or mostly the same, well maybe customers won’t be lining up to buy them, assuming most upgraders replace their smartphones every year.

Reality seldom enters the picture.

Now it is true that Apple’s revenue is heavily weighted towards iPhones. So if sales were to flatten or decline, it could have a real serious impact. The media and financial analysts continue to wait for Apple’s next act, as if any of the new products could possibly replace that revenue stream. It is true that iPhone sales can’t increase at their present clip for very many years before the ultimate saturation point is reached.

That appears to have happened already for other gear. Samsung is not doing as well as it used to, and Apple has sucked the air out of the high-end of the smartphone market. Companies that compete with Samsung at the low-end appear to be succeeding, although making decent profits on cheaper gear isn’t so easy. Indeed, if you subtract Apple’s profits from the market, there’s not much left. Remove Samsung from the equation and they’re mostly nonexistent.

Since one supposes a tech company is being run to earn profits in addition to bringing in decent revenues, I wonder why some are still around.

In any case, the next question is what Apple is bringing to the table to, in the future, make up the difference when iPhone sales stop growing at a torrid pace, or to replace it. At one time, it was thought the iPad was a valid contender, but the long upgrade cycles, the arrival of phablets, and the polarizing reactions by some to tablets haven’t helped. Sales are down — but not out, according to Apple.

So there are improved multitasking features in iOS 9 that mostly impact such recent models as the iPad Air 2. There are also published reports that a larger version, the rumored iPad Pro, will help push sales in the enterprise. Graphic artists may also embrace the new design if it comes to pass.

Add to that the delayed replacement cycle, where those with early iPads are finally ready to take the plunge and buy something new, and perhaps the product will begin to regain its footing this fall.

To be clear: I rarely use my wife’s iPad, and I haven’t bothered to install the iOS 9 betas on it because she’s a creature of habit and I don’t want to expose her to a new release until the final version is ready to install. She’s active on Face-book as an advocate for animal rights, and runs back and forth between Safari and the Face-book app. Perhaps being able to run more than a single app will be helpful, or maybe she won’t care.

The other upcoming product with potential is the fourth generation Apple TV. I write this ahead of Apple’s media event, which happens to coincide with my birthday for no reason other than timing, so I am not going to comment over what might appear and the feature set. There’s plenty of coverage about that already from here and elsewhere.

But even if Apple TV becomes highly successful, that success has to be measured. It won’t match the total number of TVs in service, and the lower price won’t mean near as much to Apple’s bottom line as an iPhone, or an iPad for that matter. Even if Apple does introduce a TV subscription service, the rollout to different countries will be slow. Contract negotiations are hard enough for one country, so imagine dealing with several. The channels you savor in the U.S. do not exist in the UK and elsewhere. So even if the venture succeeds, it may take years to bear fruit.

Apple Watch? Well, there’s plenty of opportunity there, and maybe if it becomes a standalone gadget that doesn’t depend on an iPhone, it could become the next generation smartphone. Maybe, if people can put up with the tiny display for many functions. Or maybe Siri will make up for the difference.

An Apple Car? Too early to tell!

So what replaces the iPhone income stream? A good question, and maybe there will come a time where Apple’s growth will slow to more reasonable levels, and people will just have to accept the situation. Or perhaps Apple will develop the combination of products and services that will indeed keep the revenues flowing at far higher levels. But the sort of growth patterns Apple has seen in recent years have to level off eventually, for one day Apple would have more money than any single country on Earth. Their cash reserves exceed that of a few now.

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3 Responses to “Putting Apple on the Line”

  1. DaveD says:

    Yes, there are way too many who spout “What Apple should do.” I find it good to see that Apple follows its own path. Start out with a 1.0 product that disrupts the existing business and then over the many years working to refine it. Making quality hardware improvements and providing good user experience through software and services.

    Over time the Apple Watch will become better. You can see that Apple is working to improve the watch OS. If the rumor mill is correct, we will soon see an improved Apple TV.

    What you have written, the following is a very logical statement.

    “But the sort of growth patterns Apple has seen in recent years have to level off eventually, for one day Apple would have more money than any single country on Earth.”

    Why the so-called tech analysts and pundits don’t get that?

  2. dfs says:

    If I were a Wall Street analystI’d like to have a MUCH better idea of what kind of revenue Car Play does/is expected to generate before I leapt to any conclusion about Apple’s ongoing health. We are about to enter the Year of Car Play, the year in which it first shows up as OEM on 2016 mainstream models with costs within the reach of average consumers (until now it’s been pretty much restricted to the Ferrari). How is this going to affect Apple’s overall financial picture? What kind of licensing fees or royalties is it going to bring in? So far, Car Play has pretty much flown under Wall St.’s radar. It’s about to become a lot more conspicuous. What effect if any will this have on the financial astrologers’ thinking?

  3. Viswakarma says:

    Wall Street “Investors” don’t understand and can not forsee the long-term implications of Apple’s announcements.

    A very good explanation of the role of the Wall Street “Investors” in business and society is described in Professor Robert Reich’s “A Crisis of Public Morality, Not Private Morality” (http://robertreich.org/post/128561058250).

    The new large iPad with its accessories (Keyboard and Pencil), software from Microsoft and Adobe, and partnerships with IBM and Cisco essentially kills the need for Windows PCs from various manufactures (Dell, HP, Lenovo etc.) in small, medium and large enterprises.

    The new iPad makes the existence of Microsoft’s Surface irrelevant!!!

    The new iPad has enough power to function as a enduser Graphics Workstation for AutoCAD/CATIA/NX and other CAD Software.

    There are many more areas of enduser computing that are now impacted by the new iPad from Apple.

    One therefore should not take the Wall Street Index vagaries are essentially not a good indicator for establishing an enterprises IT Strategies.

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