A Curious Solution to Address Apple’s iPhone “Problem!”

November 7th, 2017

For the past few years, Apple has been regarded as essentially a one-product company, because more than half of its revenue is generated by the iPhone. The theory does that, if iPhone sales tank, or start to erode, the company is in deep trouble, very deep. The impression was only buttressed during the quarters where iPhone sales were, in fact, a little lower.

They have to diversify more, so they say.

But what about Apple’s other products and services? How long can this problem, if it is a problem, persist before Apple looks for other solutions to continue to shore up sales?

In the 1990s, after Steve Jobs took over as “iCEO,” he discontinued most products other than Macs and some software. So basically, until the iPod arrived in 2001, Apple was essentially a one product company. Of course, sales were but a fraction of what they are now, but that had to be something quite significant.

Now it’s quite clear that iPhone sales did grow during the September quarter, and the December quarter may be a blowout, assuming sufficient stocks of the iPhone X are available.

But are there any other products that might pick up more of the load if iPhone sales begin to fall again? According to one published report, one of those candidates is, believe it or not, the Mac.

Despite some questionable surveys from IDC and Gartner about flat or lower Mac sales, the reality was something else again. September quarter sales were 5.4 million, up 10% from last year. For the full fiscal year, Apple sold 19.3 million Macs.

For a couple of years or so, it appeared Apple was giving Macs short shrift. Product refreshes were slow, and what was going on with the Mac Pro anyway? That spring session with a handful of tech reporters was designed to shore up the Mac platform, with assurances that Apple finally got the memo. By June, most Macs received upgrades, including the MacBook Pro, somewhat unexpected considering last fall’s introduction of new models featuring the Touch Bar.

Reports of an iMac with pro features will be realized with a brand new model, dubbed iMac Pro, with a newly designed thermal system that is designed to support Intel Xeon CPUs with up to 18 cores, and up to 128GB of ECC RAM. A starting price of $4,999 would have seemed unheard of until now, even though a fully outfitted “conventional” iMac can become costly maxed out with extra RAM and the biggest SSD Apple offers.

In fact, I was able to boost the price of the regular iMac to $5,329 by checking all the hardware options, including the Mac Keyboard with Numeric Keypad. But without software, and I didn’t select a Magic Trackpad 2, because I don’t like them. One can always dream.

The iMac Pro is due to ship in December, and with the promise of a new modular Mac Pro next year, and hints that the Mac mini may be refreshed at long last, it’s clear Apple is devoting a fair amount of attention to the platform. This may mean, in the twilight of the PC era, steady sales improvements for a while.

A surprise? You bet.

Now one article focusing on Apple’s other businesses also points to Services, a product category that continues to soar. Services include the App Store, Apple Music, AppleCare, and even iCloud. Revenue hit $8.5 billion in the September quarter, more than the Mac by the way. This means that Apple is maximizing revenue from its customers who, once they buy an Apple gadget, are willing to pay for apps, streaming music and even movie rentals and sales from iTunes. It makes customers even more valuable to the company, since it’s more than just selling more gear.

One surprise appears to be the Apple Watch. It comes at a time when smartwatches and other so-called wearables haven’t done near as well for other companies.

Even the vaunted Fitbit hasn’t delivered major sales improvements. One highly-touted smartwatch maker, Pebble, which arrived before the Apple Watch, basically crashed and burned, as the company ended up liquidating its intellectual property to Fitbit for a pittance.

Google Android Wear? Samsung Galaxy Gear? They are barely afterthoughts. It almost seems as if the Apple Watch will find itself dominating its market in the same fashion as the iPod took over the digital music player category beginning in the early 2000s.

While Apple doesn’t break out Apple Watch unit sales — and the skeptics have insisted it may be a flash in the pain — sales reportedly improved by 50% in the last quarter. It means that even a few million became a few more million, and if the pace of growth continues, that could mean huge numbers in a few years.

Right now the Apple Watch remains essentially an iPhone accessory. But by adding an LTE radio, which allows it to perform additional functions as an independent gadget, Apple has opened up loads of new possibilities.

I wouldn’t even guess at its potential. Maybe it will never hit sales numbers comparable to the iPhone, but does that even matter?

Besides, there are no doubt a number of Apple products under development that we don’t even have a hint about and not just a self-driving platform.

All in all, the iPhone will become a less significant factor over time. How could it be otherwise? But that doesn’t mean Apple will be stranded without followups or successors.

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