The sensationalist titles are everywhere this week proclaiming that Apple “is no longer the iPhone company”. Shona Ghosh writes the following for Business Insider:
Apple has undergone a major shift.
For the first time since 2012, the iPhone accounts for less than half the firm's overall revenue.
It's not far off, at 48% for its fiscal third quarter. But that number is sure to keep falling.
In further good news for Apple, its overall revenue was up for the quarter. In other words, Apple is capable of making money from things that aren't the iPhone faster than iPhone sales are falling. —Shona Ghosh, Business Insider
They couldn’t be more wrong. Shona herself admits later in her article that all of this new revenue still is dependent on the iPhone. Apple’s world still revolves around the iPhone. If the iPhone installed base shrinks, so will all of their wearables and services revenue.
I’ve seen this first hand when I was working for the Cabela’s Corporation in the 2000’s. Cabela’s had concrete market analysis which showed that their core market of gun-toting hunters was shrinking. So in response, Cabela’s started branching out into new markets. They started emphasizing camping equipment, boats, sweatshirts, and shoes.
It worked for a few years. While these other market segments were ramping up everyone at Cabela’s was tempted to think that they had successfully averted any sales decline. But sales were growing only while their core market was willing to spend more and more. Eventually, their core market reached their limit. Cabela’s ran into a hard ceiling for all the non-hunting merchandise because their core customers couldn’t afford any more coolers and sweatshirts.
Apple is following the same road. Their wearables and services are being gobbled up by happy iPhone users but eventually this core customer group will become saturated. Sure Apple services and wearables are growing now. They are in the ramp up phase. What happens when the core customer group is tapped out?
One way or another Apple has to steal market share from Android to make this work. They either need to steal Android phone users or they need to steal from service providers on the Android platform. It remains to be seen which direction Apple will go. But if Apple makes everything available to everyone and they fail to lure Android users they will have done irreparable harm to their most important product line of the iPhone.
Apple is currently skimming the cream off the top. The easy service revenue from their current customers is nice but that will stop growing within 2 years. Then Apple is right back to fighting for market share.
For the first time since 2012, the iPhone accounts for less than half the firm's overall revenue.
It's not far off, at 48% for its fiscal third quarter. But that number is sure to keep falling.
In further good news for Apple, its overall revenue was up for the quarter. In other words, Apple is capable of making money from things that aren't the iPhone faster than iPhone sales are falling. —Shona Ghosh, Business Insider
They couldn’t be more wrong. Shona herself admits later in her article that all of this new revenue still is dependent on the iPhone. Apple’s world still revolves around the iPhone. If the iPhone installed base shrinks, so will all of their wearables and services revenue.
I’ve seen this first hand when I was working for the Cabela’s Corporation in the 2000’s. Cabela’s had concrete market analysis which showed that their core market of gun-toting hunters was shrinking. So in response, Cabela’s started branching out into new markets. They started emphasizing camping equipment, boats, sweatshirts, and shoes.
It worked for a few years. While these other market segments were ramping up everyone at Cabela’s was tempted to think that they had successfully averted any sales decline. But sales were growing only while their core market was willing to spend more and more. Eventually, their core market reached their limit. Cabela’s ran into a hard ceiling for all the non-hunting merchandise because their core customers couldn’t afford any more coolers and sweatshirts.
Apple is following the same road. Their wearables and services are being gobbled up by happy iPhone users but eventually this core customer group will become saturated. Sure Apple services and wearables are growing now. They are in the ramp up phase. What happens when the core customer group is tapped out?
One way or another Apple has to steal market share from Android to make this work. They either need to steal Android phone users or they need to steal from service providers on the Android platform. It remains to be seen which direction Apple will go. But if Apple makes everything available to everyone and they fail to lure Android users they will have done irreparable harm to their most important product line of the iPhone.
Apple is currently skimming the cream off the top. The easy service revenue from their current customers is nice but that will stop growing within 2 years. Then Apple is right back to fighting for market share.
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