Apple can’t grow like this forever. No company can.
In a few short years, Apple has become the biggest company on the planet by market value – so big that it dwarfs every other one on the stock market. It dominates the Standard & Poor’s 500-stock index as no other company has in 30 years.
With the kind of money Apple has in reserve, and the kind of growth figures the company is still demonstrating each quarter, this seems like a very, very, very distant future. Apple will remain on top like this for a long, long time.
I do not see the problem here. With their pricing, they are still selling a product for a limited group of customers, more or less. And they might stay this way, as long as they have demand for it.
And this means there always will be a market for more affordable products.
Apple may rule its own category, because there are not much competitors that have a similar premium product.
Yeah, that was people said about IBM too, once upon a time.
Edited 2015-05-04 09:56 UTC
I don’t see how IBM story is even remotely comparable to Apple’s own story. These are completely different companies, with completely different business models and completely different customers. And the context is completely different as well.
I am sure one can find a few arguments to think that “Apple is doomed” sooner rather than later, but this one is meaningless (and just plain lazy).
For those who think Apple will not be the king of the hill for much longer I would ask: which company will replace them?
Because when IBM was the king, there were lot of contenders, Microsoft being the first one.
But today? Considering the reason Apple became so big and considering their growth potential: who will beat them? Because one should not forget that Apple is that big with only 10-15% market share in their main markets.
I don’t think any existing big player can beat them because none of them has the business model required to do so. And I don’t think there is much room today for a new players to become that big (because it would be acquired before by existing players).
I think only Apple can kill Apple long term (and at some point will). But while some think Steve Jobs death was the beginning of the end for Apple, I don’t think they are right. Jobs did make Apple a giant. Time Cook will make Apple a long term giant.
“Apple can’t grow like this forever. No company can.”
Forever is a long time and with such premise, you are sure to be right indeed.
This is not true. In their main markets – US, UK, Ireland, Japan (?) – they sit at 45-50% market share. The 10-15% is in mainland Europe. I’m not sure about China, but I think they are closer to like 25% over there?
I was talking worldwide share in their main market product-wise (iPhone, Mac).
As per Apple’s latest earnings release, iPhone now makes up over 80% of the company’s business. Macs are irrelevant at this point.
No, not 80%.
And the “dead” Mac business is a $20bn business. And the “dead” iPad business a $20bn business. And the service business a $20bn business.
And without the iPhone, Appe is still bigger than Google.
It is good to be dead in Apple’s land.
This is the mistake people make when they look at the percentages and not the actual numbers.
Apple is currently selling more Macs than they every had in their history.
Due to carrier subsidies of USD400 per phone. Without these subsidies Apple would barely break even.
I totally agree.
The catch is, markets come and go. What was once big, can become completely obsolete at some point. So the fact that Apple is big today doesn’t guarantee it will stay relevant tomorrow.
Edited 2015-05-04 17:33 UTC
And MS as recently as early 2000s.
A better comparison would be Sony. Sony owned the portable music player market, and pissed it away when refusing to support the more open mp3 format. Apple is still mostly about that market, although the iPod has been replaced by the iPhone. The iPad has already peaked, and failed to deliver on the media and education revolutions it promised.
Yeah, but which company did disrupt Microsoft, Nokia, Blackberry, Palm and a few more?
Which company is the “Apple of Apple”?
With a current world wide market share of >75% for tablets and mobile phones, Apple is by far not leader in volume. It was more like Google did kill MS, Nokia and Blackberry in the Smartphone market. I do agree more with -APT- Apple currently only sells in the high end market, thus has giant earnings. A growing chinese middle class tends to be very price sensitive, and when proper chinese products arrive they tend to buy them, so Apple now grows slower than the market. And this growth will end quite soon when the market is saturated.
In tablets we can already see this saturation: Many people are quite happy with their 2012 iPad or Android tablet and I expect Microsoft to bounce back in tha tablet market sooner than later. Imagine the 9 inch Windows tablet that runs iOS and Android apps in tablet mode and converges to a desktop when connected to an external monitor, Keyboard, mouse. This will cost Apple market share in the business and educational market. And when the rush is over and fanboys stop buying new iPhones every year, Apple is well advised to spend it’s cash in different investments.
I think, it is not wrong to compare to Microsofts rise and fall: Microsoft was a child of the late 1980s and the whole 1990s, when the PC market (both desktop and mobile) had immense growth. They had now answer when around 2005 the first tablets and smartphones arrived and there was no growth in the PC market anymore – just replacement sales.
I am not sure whether or when “wearable” will be the next big thing. But I know for sure, that the tablet and smartphone market will be saturated in a not so distant future and people just buy a replacement every three years or so and no “first time customers” are reachable anymore.
“Apple is by far not leader in volume. It was more like Google did kill MS, Nokia and Blackberry in the Smartphone market.”
Then why is this article not about Google but Apple?
Because Apple is their favorite target and Google is not evil! bwahhahahahahah
Edited 2015-05-04 18:21 UTC
I don’t think the demand for Windows tablets is what you think it is. And you can ALREADY hook an Android tablet to a monitor and use a keyboard and mouse with it. The software gap is still there…but be honest…what percentage of users really NEED Photoshop? Or Quark Xpress? Or even Office? MOST users get by just fine without a “full” Windows based computer. I am one of them. Windows 8 pissed me off so badly, my laptop running it is collecting dust…and I haven’t missed it one bit. Matter of fact, I am happier without MS in my life.
I do use both options: Windows tablet plus monitor or Android tablet plus monitor. In fact, an Android phone with 1920×1080 plus proper remote desktop client makes a great thin client. But Windows 10 on a properly connected tablet just brings proper desktop convergence.
I am a Linux guy and really hoped Ubuntu would bring this kind of convergence first. But until now they could not deliver. This doesn’t mean I am going Windows now, but I am quite impressed.
I would argue that it’s still applicable to MS, even though their overall influence is waning. But I really see Windows 8, and their push to a closed ecosystem as their “PS/2” moment. What happens when a company bases their entire product line on something the customer DOES NOT WANT? Well, we saw what happened when IBM pushed PS/2 hardware and the OS/2 operating system. Now we get to watch it happen all over again with Windows, Windows Phone, Surface, and Xbox.
Then again, they seem to have realized the PS/2 effect – Win8.1 moderated things a bit, and Win10 backtracks further.
On the other hand, Win10 for phones seems to be going full-on OS/2, and risks the same “why bother writing native apps”-effect. We’ll see.
Edited 2015-05-05 19:13 UTC
IBM was ‘on top’ at a time when there was a very limited number of viable competitors. It’s downfall was the proliferation of companies which whittled away it’s dominance one chunk at a time ( Microsoft being a great example ).
Apple is dominant despite a much more competitive marketplace. Indeed, it’s a marketplace that almost completely killed Apple not too long ago.
Moreover Apple has focused on creating a tightly integrated product ecosystem that would be very tough for a competitor to crack – arguable only Google and Microsoft are in a position to do that and although Google has done that successfully with Android Apple has responded very effectively.
Of course, Apple will not remain on top forever but it’s a much more robust competitor then IBM was in it’s day.
“Apple will remain on top like this for a long, long time.”
The average time as ‘Top Dog’ is roughly five years.
General Motors, 3M Corporation, IBM and Microsoft have all taken turns at being No1. None of them ever gambled their entire future on a single product [iPhone] like Apple has.
I expect Apple earnings to fall very significantly within 2-3 years when the phone business becomes completely commoditised.
I wouldn’t be at all surprised if Apple are no longer in business in 20 years time.
Edited 2015-05-04 10:34 UTC
Given the financial reserve they have been running and the momentum of their Mac sales and their R&D portfolio: they really have not gambled their entire future in recent years.
If an Apple product crashes it would hurt – no question but … they would not come near to folding.
To my eyes the iWatch is not a winner but they can take that chance….
Edited 2015-05-04 10:58 UTC
Apple is almost totally reliant on the iPhone ecosystem. The iPhone business isn’t very profitable without carrier subsidies of USD400/unit.
Apple’s real business is running a (legal) protection racket to extort money from phone carriers. When (not if) the subsidies stop Apple is cactus.
Edited 2015-05-05 00:17 UTC
Actually, IBM did. It was called the 5 billion dollar gamble. It created the S/360. It pretty much invented the modern computing industry.*
* Including the idea of selling software and hardware separately and screwing the customers over for each.
Edited 2015-05-04 11:47 UTC
Interesting to see this vacuous statement repeated when the evidence showing that commodification is a myth is all around. It didn’t happen in the past and it has not happened during the computer era. High quality cotton clothes, for example, can now be produced so cheaply that people can buy them almost as disposables and yet there is a thriving, and very large, high end clothes market. In the computing arena the PC market was supposed to be commodified twenty years ago and yet here is Apple selling PCs in the high price range, taking half the profits of the entire PC OEM business and growing sales in a shrinking market.
People have been saying Apple was a one trick pony doomed to die, or at least slip into obscurity, for most of the last forty years. First it was the Mac that was being killed by the cheap PCs, then it was the iPod that was going to be killed by cheap MP3 players, now its the iPhone that is apparently doomed. How anybody with a brain can believe that sort of guff when Apple raised its ASP the last year and massively grew its business is beyond me.
I think its true that Apple could commit suicide but the main product Steve Jobs worked on after his return to Apple was Apple itself and now three and half years after his death it seems to be doing just fine.
Apple sales of iPhones have a lot of growth potential. Apple is growing at an astronomical rate in China and the replacement cycle of iPhone 6s in its installed base has only been 20% so far.
I think the Apple Watch, explicitly designed and marketed to make people use their iPhones less, is proof that Apple is brave enough to avoid a strategy tax cup de sac and move beyond its own hit products. Its true you need an iPhone to work with the Watch – for now – but the design of the Watch makes it clear that Apple wants to cut the tether to the iPhone as much and as fast as the engineering developments will allow.
When a company gets it dead right at a moment of genuine technological inflection it can, unless it cocks it up, achieve great longevity until the next inflection point comes along. Apple absolutely nailed the transition to small mobile computing devices with the original iPhone, and did so before the competition even knew what was happening. Once out of the gates they have proved quick enough to never be caught. Its too early to say whether wearable computing is a moment of similar inflection or whether the Apple Watch is a game changer like the iPhone was but my suspicion is that the it is a moment of real change and that Apple have once again nailed it.
Apple have weathered nearly 40 years in the top league of the tech business, how long will it take before we can say goodbye to the utterly naff “Apple is doomed†meme, 50 years, 60 years, before I die?
Do you work for Apple? Because your comments are nothing but propaganda.
Apple derives over 70% of it’s revenue from the iPhone. Over 80% of iPhone sales rely on carrier subsidies averaging USD400/unit. So about half of Apple revenue (and the vast bulk of its’ profits) are direct subsidies from phone carriers.
Apple was on the verge of bankruptcy when they were bailed out MS. In fact Bill Gates could have killed Apple on the spot by stopping sales of Office for Mac. The only reason he didn’t was because MS needed a competitor to avoid antitrust lawsuits.
You mean like Google who still makes all its money from one product that it developed over fifteen years ago.
Apple has done this before, been at the top and then fallen, only to rise up again.
IBM is starting to get better too,
I think it will be a long time before apple is de-throned and becomes a niche again, however like kings/presidents/companies everything has an end, steve jobs himself said that death is a game changer to remove the old to make way for the new, ok he was talking about people but companies/organisations also follow the same rule.
What a great discussion of this minimalistic article containing only one sentence: Page Not Found. 😉
We only have to look at BlackBerry/Nokia to see this. Mobile phones for most average people are on a 2-4 year lifecycle.
If Apple makes a mistake, or some other company comes out with a revolutionary version of a similar product – it doesn’t take long for consumers to switch. It only takes a few years for the pain to be felt if their next release is a flop.
This, This, More this, and even more this. Apple has to be not terrible for each product launch and hope that no one is incredibly better each 2-4 years.
I haven’t been great at forecasting the popularity of their products, so I won’t now. However, the lifespan of their products is short. That much appears to be true. If the life span of each product increases ( as smart phones, notebooks, ipads, etc) get to be “good enough” to not warrant a new purchase. Well, that’s bad too. Being at the top is a balancing act that must constantly be maintained.
It’s tough to stay on top for any company for long but, I think Apple does not outdo other companies because of superiority of iPhone really. Apple is in a great position that some car manufactures find themselves in.
I think people will always buy iDevices for the brand (and the brand can last a really long time).
The companies like Nokia and Blackberry were not following the same strategy, they were simply selling devices they thought were the best. Apple tell you to buy their device because no matter how it does what when it finally does it, it is the best. People love to be told that, they get to believe. What would bring Apple down is other companies changing their strategy and view towards what their devices.
Take for example Samsung, they try to make devices that can do as many things as possible but fail to make buyers believe that they (Samsung) believe their device is the best.
So I think Apple sells the belief too into their devices and ecosystem, they don’t just compete at technical level only.
Of course you are right: People buy Apple because of the nimbus of getting the best, most stylish product in a certain market. As soon as this nimbus fades, it’s getting less easy.
Take Daimler AG for example, they are still doing strong, selling cars to people who are also buying the nimbus of a great brand. People buying this nimbus do not care whether they can get the same ARM core and the same display for half the price – or whether their C class has a diesel engine ripped straight from a Renault Clio. But in the premium car segment others might be doing stronger, also because they react to diffent needs of the people. Young urban hipsters currently tend to get the biggest iPhone possible and go for a Fixie plus carsharing by means of transportation.
Apple already gave up the professional PC or workstation market by abandoning professional tools, making the Mac Pro nice, but not really expandable and refusing to offer 30 bit graphics workflow. With the MacBook Air and the current single USB port MacBook they underline that they want to be recognized more as a fashion company – and they clearly tell us, that the PC is just another computing device many people just use ocassionaly now. I guess most of us could do their spare time computing with a tablet and a bluetooth keyboard.
So, Apple is very smart: With their new 12 inch Macbook they are just going to squeeze out the last drips of juice from the notebook market orange.
I doubt, Apple would soon go to bankcruptcy or irrelevance. Neither IBM nor Microsoft did. Even Nokia is still there. After selling the rubber branch and later the smartphone branch they seem to go quite strong as network supplier.
But just take a look at Microsoft. They had some peak at the end of 1999, NT was doing strong, PCs with Windows98 were selling like hell, businesses were eager waiting for Windows 2000. Exactly one year later, end of 2000, the stock was at 1/3 of the late 1999 price.
It just takes another iPhone or the next iteration of the Apple watch that gets a stale welcome and Apples to make AAPL plunge. Of course ath $400.000.000.000 market cap AAPL would still be the fat gorilla in the room, but at least look less untouchable or invincible.
Products are important but how valuable is Apple’s brand? Apple is a kind of “myth” something IBM never was.
And probably their logo is the best Apple’s invention ever!
Microsoft was always going to wipe Apple. Apple is bigger then Microsoft now; so, we now get stories about how Apple can’t stay on top.
Why isn’t there ever a story about how Microsoft couldn’t stay no top or how Microsoft is going out of business?
Microsoft was handcuffed for nearly a decade by antitrust lawsuits. That is the reason their market cap dropped by 2/3rd. It is also the only reason why Apple is still in existence.
As some point in history, Microsoft managed to wipe Apple… and then saved them with $150M (antitrust issues aside, it’s questionable Apple could have survived without those money).
Apple’s slow down will be the fastest in history 🙂
My guess is that we’ll see the start of it this decade.
Apple has been fortunate and smart enough to manufacture the products and the desire to buy them. It’s worked extremely well this far.
As far as living off of cash assets, you’d be surprised how quickly a mega-corporation can burn through money while things go south. When the product well dries up, and the consumer has moved on, that money gets spent in a hurry on the shell game of corporate earnings on wall street until there is nothing left. Then the layoffs start, and the facilities close.
As long as corporate america (and apparently china) continues to feel the need to buy iphones and ipads, Apple’s bottom line should be fairly safe, near term.
The thing that Apple has going for them is that they control their own ecosystem.
iOS and OSX are both Apple made and owned. IBM got out of the PC business because they were just another hardware peddler alongside Dell, HP, Acer, Asus, etc etc etc.
They were all sub-contractors to the MS ecosystem.
Another thing is that Apple has so far behaved more like a private company than the publicly traded one that it is.
By this i mean that they take the long view in terms of earnings, rather than fretting over the quarter to quarter that lead IBM to dump Thinkpads, Dell to go private, and HP to go through 3 CEOs in nearly as many years…
I used to think the same thing about Microsoft and others but a failing Apple would be a different Apple than we have today.
To draw a mental picture imagine giving Blackberry a pile of cash as they were on the way down. How much would it have changed the end result?
Once people and ecosystems begin to make a major shift for a handful of usually very valid reasons its hard to buy your way out of the ditch you are digging and to make matters worse the same culture/decision makers/strategy that got the company into that position is going to be responsible for deciding how to spend the money.
Companies end up burning though money as they are no longer profitable, then cutting staff to reduce spending (which is also expensive) and hurts employee morale, drives away talent, and compounds the rate of decline usually as the products suffer. Market share shrinks more, more people are cut etc.
This failure story seems to be a really common scenario. Successes are less predictable but failures often follow a very similar path and its not one that cash alone is very good at solving.
When companies sinking this quickly hastily buy another company with their available cash to use a floatation device they often end up harming the value of the other company too.
AOL essentially purchased Time Warner in this scenario and the merger soon resulted in one of the largest asset write downs in corporate history.
Its a truism that no empire lasts forever.
The difference between IBM and Apple is their market and more importantly, Brand.
“No one gets fired for buying IBM” corporate culture still endures today, the decline was slow as competition chipped away as its base, they offloaded whole businesses they didn’t want to maintain to re-invent themselves.
Apple’s position is different. They rely on their brand and fashion trends. At the moment Apple are at the forefront, defining the trends (iPod, iPad, iWatch) as a premium product. But the day will come when they miss the trend and are no longer the favoured brand or worse, have a complete flop of a product. Perception and association of failure are Apple’s greatest threat.
I bought an Apple computer in 1998. I’ve bought six since then plus iPhones and iPads.
I didn’t buy them because they did the most. I bought them because what _I_ do and _need_ them to do they do _very_ well.
What you need could be very different and Apple may not be for you. That is all fine and good.
There are a lot of different people in the world. Thank God or whoever or whatever for that.
The keys to Apple’s success is _extremely_ easy. When they were great it was because they were making what _they_ really wanted to use.
When they were bad it was because management was trying to make money.
Then Steve Jobs came around again and made Apple start making what _he_ really wanted to use and they started being successful again.
Tim Cook and Jonny Ive are making what _they_ really want to use. And they are being very successful.
The key is, if you try to make things to make money you may be somewhat successful. Make things that you love and you may be VERY successful.
Look at Samsung. They old more phones than Apple did but their profits were a whole lot smaller. That told everyone that they didn’t believe in their products. Then when they wanted to charge Apple prices for their phones everyone laughed at them and went elsewhere.
You have to believe in your products and love your products and forget about the money part but do the supply chain well and you will make money. Regardless of a bunch of nerds that don’t like their products.
They designed them for themselves and for people like them. They don’t need everyone to want or need them to make a lot of money. And for people like me. Their products work VERY well.
It takes me less steps to produce what I produce than it does with Linux and Windows. And each step takes time away from other things that I could or should be doing. So I’ll stick with Apple for now. Until someone takes over and stops making things that they love.
PS: When people tell me their Word documents won’t open I have them send them to me. I open them with Pages on my iPad and send them back to them as docx files and they can open them. Nice piece of work Microsoft.
_I_ _like_ _how_ _you_ _tried_ _to_ _emphasize_ _words_ _with_ _underscores_ _at_ _first_ _,_ _but_ _then_ _said_ FUCK IT “CAPS LOCK IS MUCH FASTER” BY THE END OF IT.