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Where Will Apple Go From Here?

Steve Jobs is gone, but Apple Inc. is still riding high. Sales of the consumer electronics company are set to reach a staggering $263 billion in fiscal 2018  up 144% from $108 billion in 2011, the year that Jobs died. Apple’s $1 trillion-plus market capitalization has woven its story into the fabric of global business history. Pull any strands of the Apple saga, though, and they all lead back to its better-known founder.

What is Apple without Steve Jobs? The market wants to know. Apple, under current CEO Timothy Cook, has only partially answered the question. Apple, they’ve shown, can become even greater than its founding partners ever thought, and the company’s enormous profits indicate that the current executive team knows how to run a smooth engineering and supply chain marvel. However, the iPhone, iPad, Mac, iTunes, and “other services” fueling Apple’s massive sales and huge stock valuation all hark back to the Steve Jobs days.

So the market waits. Consumers, institutional investors, regular Anne and Joe stockholders, contractors, component suppliers, software developers, and everyone else in Apple’s huge universe are watching and waiting. We all want to know what non-Jobs inspired “new thing” Apple will create and make an instant success. Everyone wants to believe that the company has an incredible and unique innovative spirit.

It may be a long wait. Or it may happen tomorrow. Few people outside of Apple’s management know enough about the “secret projects” that the company is believed to be working on to authoritatively announce them. Apple engineers and senior software employees — we think — have bits and pieces of the information, but putting these together to form a complete picture is quite difficult. What everyone agrees on, though, is that “the next Big Thing from Apple will be huge.”

Why? Because investors and suppliers do not want an end to the Apple story. Everyone wants and expects the company to continue to grow at breakneck speed. And herein lies the greatest challenge that Apple faces, masked by its $1 trillion market capitalization achievement. Apple is at a crossroads today: It is growing, but the biggest sales spurts on a percentage basis are in services rather than the iPhone.

The iPhone remains a compelling purchase for many consumers, but there are ominous signs that the product is flagging. Annual shipment has been wobbly, zigzagging depending upon what buyers think of new iterations of the iPhone. In response, Apple is focusing on getting buyers to pay more for each unit, turning invariably into a sort of entrepreneurial magician.

The next big thing
A cottage industry of experts, analysts, and enthusiasts has sprung up around the core question of what Apple will roll out in future, each group vying to divine what that next “Big Thing” from the company would be. What, they ask, will Apple do for an encore?

It’s a fair question. But before hazarding a guess, let’s do the numbers. Analysts estimate that Apple’s revenue will top $263 billion in fiscal 2018, up about 15% from $229 billion in the prior year. To put these numbers into perspective, consider this: In fiscal 2008, Apple’s revenue was a mere $32 billion. iPhone sales of $1.84 billion accounted for less than 6% of Apple’s revenue that year. At the time, Apple was essentially a PC ($14 billion, or 44%, of sales) and iPod ($9.2 billion, or 28%) manufacturer.

In 2008, Apple was betting that its future success would be anchored in the iPhone. It was a well-placed wager. By 2017, the iPhone was contributing 62% of Apple’s revenue, while PCs represented 11% and iPads 8%. Services, Apple’s fastest-growing division, contributed $30 billion, or 13%, of sales. (More on this critical Apple business later.) What happened to the iPod, the contributor of nearly one-third of revenue from just nine years earlier? iPod sales were so minuscule in 2017 — for a company of Apple’s size — that they were folded into a group of “other products” that include Apple Watch, TV, Beats products, and third-party accessories. – EE Times

 

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