“As of today, Apple is seen as a hardware maker and that means revenue from its products is viewed as non-recurring,” Ophir Gottlieb writes for Capital Market Laboratories. “But Apple’s tireless investment in R&D has put it on a path to a radical change in its business model which could change its valuation by nearly two-fold.”
“Over 60% of Apple’s revenue comes from the iPhone. Tack on an additional ~20% from Macs and Apple Watch and we’re looking at hardware company. It’s certainly the most successful one of all-time, but it is still carrying the anchor of a hardware company’s valuation,” Gottlieb writes. “When we compare Apple to all of the other mega cap technology firms, we can see its price to earnings near the bottom. And while a part of a price to earnings measure takes into account future growth, don’t tell us that Microsoft, with a price to earnings of nearly 40 compared to Apple’s price to earnings of 10, is some sort of bastion of mega tech growth. It isn’t.”
“We like to point out how Wall Street misses just about all of the true realities in technology, but we have to say, Goldman Sachs has been spot on with Apple,” Gottlieb writes. “Goldie continues to pound the table that Apple is shifting to a model that will drive recurring revenue rather than strictly hardware… The key here is the seismic shift Apple is making toward a revenue model that is recurring rather than one-time, and that means a radical shift in its valuation. CML Pro sees it. Goldman Sachs sees it. It’s just a matter of time before Wall Street sees it. ”
Read more in the full article – recommended – here.
MacDailyNews Take: Gottlieb gets it.
[Thanks to MacDailyNews Readers “Fred Mertz” and “Arline M.” for the heads up.]
I sure hope so. Wall St. is stubborn and tech stupefied.
“You know if the hardware is the brain and the sinew of our products, the software in them is their soul. Again if you look at an iPhone, iPad, or an iPod, it is software wrapped in really wonderful hardware. It’s software in the device itself, it’s software on the PC or the Mac, and it’s software in the cloud. It’s in a beautiful box, but it’s software. If you look at what a Mac is, it’s OS X, it’s in a beautiful box, but it’s OS X. So the big secret about Apple, or not so big secret maybe, is that Apple views itself as a software company.”
Steve Jobs Bio: The Unauthorized Autobiography
iBooks Store: https://geo.itunes.apple.com/us/book/steve-jobs-bio-unauthorized/id924800720?mt=11&at=1l3v2Hm
Apple’s iconic strength and forté is and always has been software.
But they need to get their act together on the Apple software, see two other recent articles on Macdaily.
The creative load for content and content production, which is actually what carries the water for Apple is almost totally produced by 3rd party apps, which are better than ever while Apple’s apps, Mail, Safari, “iWork” etc are buggy and oversimplified. I use Mail and Safari out of habit, but everything else that I use to produce actual work for money is 3rd party. Often produced by ex-Apple employees who actually understand interfaces and how to integrate features without blowing things up.
You and I agree. But maybe we are barking up the wrong tree. Apple is not a software company. Although they had made great basic and advanced apps in the past, they do not anymore.
What they are is a great hardware company and a great operating software company. (and certainly NOT a great cloud company).
Haven’t you and I been complaining about apps and not necessarily the OS?
So let’s face it. Let’s look for 3rd party app replacements of the basic Apple apps.
I have no need for a Safari replacement but am in the market for a better Mail app and iTunes/Music app. While those apps use to work, it’s obvious Apple is not interested in providing functional apps for us. Maybe for the low-educated user, but not for us anymore.
“Haven’t you and I been complaining about apps and not necessarily the OS?”
Generally yes, but I don’t like the trend toward making OSX more iOS-like, and the change for the sake of change UI.
As long as the 3rd party apps are not affected, I am ok. However the developers of the 3rd party apps that I communicate with are not happy about Apple making their life harder, which they do with almost every “upgrade”. They have to rewrite their software to conform to some young kids’ feature whim, which would be ok if it had some significant positive functional change, rather than something whimsical.
Yes indeed, Apple needs to get its software act together meticulously, precisely because Apple is first and foremost the world’s best software company.
I just signed up for Apple Music.
Next, Apple needs a subscription model for Books and Audio Books. “Apple Library.”
Next a subscription to “Apple Theater. ”
Bundle that into a product called “Apple Knowledge.”
Love the idea! “Apple Knowledge”, though?
It’s just a name. The cool thing it plays into some old ethos from the early days. Not saying it’s a best choice.
Thinking about Apple’s recent dive into VR. Let’s take it up a notch.
Apple Sense, at $49/mo.
Do like that idea especially as physical libraries are dead just not buried yet. To be at the core of their digital replacement could be a potential hub for producing ongoing revenue and give them a chance to seriously get into the search and advertising elements that Google dominate. Google will certainly wish to fulfil that overall role over and above those bits they have that already fulfil parts of the job.
Great thinking!
So, I have to ask, where did the concept of recurring purchases of mobile phones go to? Is dropping this concept out of the rhetoric the result of mobile companies gradually dumping their recurring contract plans?
And since when isn’t someone going to buy a NEW smartphone at least every four years, if only to keep up with the new technology? Or is counting to four too difficult for the drug addled WallNut Street analcysts?
Mobile phone buying: A recurring revenue system.