Apple executives shift focus to services business

“Fifteen years ago this week, Apple launched the iPod, unleashing a wave of disruption over the music industry and reviving the fortunes of what was then a struggling computer company,” Tim Bradshaw reports for The Financial Times. “Thanks in part to the growth spurred by the iPod, Apple has never since posted a decline in annual revenues — until this week, when it revealed an 8 per cent drop in sales for 2016.”

“Now, the company is looking towards another digital-media revolution to galvanise its business,” Bradshaw reports. “With sales of its iPhone, iPad, Macs and even the Apple Watch in decline during its fiscal fourth quarter, Apple sought to focus investors’ attention on the one bright spot in Tuesday’s earnings report: its services business.”

“Revenues from online services such as the App Store, iCloud and Apple Music rose 24 per cent to a record $6.3bn, making it the company’s second largest source of income after the iPhone,” Bradshaw reports. “Luca Maestri, Apple’s finance chief, called services the ‘highlight of the quarter.’ ‘Momentum is very good,’” he said in an interview. Mr Maestri repeated a prediction first made earlier this year that, if it were a standalone entity, Apple’s services unit would be a large enough business to reach the Fortune 100 rankings of the top US companies by next year. Already, its most recent quarterly sales outstripped Facebook’s second-quarter advertising revenues of $6.2bn.”

Read more in the full article here.

MacDailyNews Take: Again, the tough compare created by Apple being years late to market with a properly-sized iPhone is now blessedly OVER.

Apple has now forecast a return to growth.

Apple’s fiscal 2016 revenue from Services alone ($24.348 billion) would stand at #155 on the Fortune 500 list of the largest U.S. corporations by total revenue, ahead of the likes of Duke Energy, Time Warner Cable, and Halliburton.

SEE ALSO:
Apple’s sales and profit fell for the first time since 2001 – October 25, 2016

13 Comments

  1. Everyone who had high hopes on Apple Watch now know that that is a dead end. Apple Watch sales are tanking and tanking hard. No way are the sales going to get anywhere near high enough to move the profit needle.

    Apple Hardware has never been in a sorrier state than today.

    1. AW2 shows in-store pick up December 1. If you order online it’s 2-3 weeks. Soooooo….is there a demand problem or are they deliberately NOT making enough???
      I have the AW2 and it is a nice step up from AW1. Just updated Watch software as well and it works well for my needs. Frankly I think with the Holidays coming there will be another “must have Apple products” season. !!

      1. If you listened to the earnings conference you’d know that it’s a supply problem. The earnings number for the watch category is utterly forgettable.

        The Apple Watch sales have been next to nothing.

    2. I am surprised to see so many fanboys now questioning Tim Cook. There are major problems with Apple. Today, Apple is still making tons of money driven largely by the iPhone. No argument there. However, this is a product from Steve Jobs, and Tim Cook has been riding this wave since he took over. A monkey could do this.

      The real problem for Apple is the near and long-term future. People are getting tired of the now lack of real innovation coming from Apple (e.g., how long it’s taken to get updates to Macs… a confused product pipeline like lack of Retina screens across the board, etc.). Ya, the Apple Watch is cool for a smartwatch, but it’s an unnecessary device hampered by a tiny screen and horrible battery life. The smartwatch market is simply not a large market and the masses are not buying them. Maybe if the right innovation came along more would sell, but that product still doesn’t exist.

      Turn the page to Microsoft’s event today, and now I’m excited. Their Studio PC is exactly what the future of the desktop PC is all about. Multiple input modes, including a pivot screen and multi-touch. Beautiful design and excellent screen. Apple cannot product a product like this because they’re hamstrung by their two horse operating system world.

      If sales of Apple’s Macs and iPhones start plummeting at some point in the future, hopefully Apple has been working on that 1 operating system universe with products like Microsoft showed today. But until then, color me concerned because the technology curve could pass Apple by while it rests on its success with technologies it built a long time ago to milk them for cash.

      Let’s not forget what happened to Apple with Sculley: Microsoft’s Windows passed the Mac OS in terms of technology and Apple was stuck because they couldn’t get another, new operating system together quick enough to stop the bleeding once the technology curve really passed them by.

  2. The plan continues….

    Hardware gets smaller, lighter, thinner, and more dependent on services. Apple isn’t a computer company. Apple makes information appliances.

    Those appliances are becoming increasingly dependent on Apple Services. Thinner, smaller, and less capable is the plan. Shifting personal infrastructure to the cloud, is the plan.

  3. Birdseed only produces anonymous crap. Not sure about anonymous Bill, but his post on the AW2 is certainly crap. And dswe starts out talking bullshit about “fanboys.”

    The proverbial true fanboys are not questioning Tim Cook, dswe. By definition, they question nothing. If you are talking about your normal, rational Apple/Mac advocates (often mislabeled as fanboys for derogatory effect), then you are exaggerating, because i only see a few vocal people (almost invariably anonymous idiots) posting negative stuff about Tim Cook. Overall, I would say that Tim Cook has strong backing among Apple advocates. That is not to say that there are no complaints, but we are a picky and complaining group by nature and training. Anything short of perfection is subpar.

    thelonius, you have posted some good stuff over the years, but you are a bit off base in your post on this topic. Apple products are not getting “less capable.” Recent Macs, iPhones, and iPads are more capable than ever. And while there has certainly been a push towards linking those devices into a more comprehensive Apple ecosystem, I don’t see that as a weakness. For other companies, in fact, that approach is often viewed as a strength and an advantage. Adding capability will require compromises between the limitations of local devices (battery life, storage limitations, processing capacity, etc.) and the capabilities offered through networking to other systems. Apple will gradually blend the local and remote resources together more seamlessly and you will probably like the result.

    1. I listen to a lot of sports talk radio, mainly to gauge the temperament of the fan base—I don’t listen to actual ball games much. I read letters to the editor with more interest than editorials. The same goes for fashion magazines and advice columns, and reviews on Amazon and Apple’s app store—and comments at Apple-oriented websites. It’s actual fans, readers, users, and customers who provide most of the really useful intelligence about anything. Experts are glib and unreliable, and may be on the take. Outside of computer science, who really trusts “experts”?

      All this is my attempt to test the “wisdom of crowds” hypothesis, that any aggregate vote nullifies biases likely to be more pronounced amongst individuals styling themselves as experts. Indeed, since 1945 “experts” themselves have retreated from finger-steepling theorising to become statistical caddies and poll watchers more than honest-to-god analysts. The public does not much trust experts as real thinkers (unless they happen to bolster their own views, of course. 🙄)

      MDN’s polls are a case in point. They seem reliable as a barometer of enthusiasm for Apple, by Apple enthusiasts. MDN polls testing confidence in Tim Cook as Apple CEO show higher support than the frequency of supportive comments. That means that trolls are operating to smear Tim Cook in the comments, but haven’t managed to rig the polls. 😜

      But never mind science—heed the power of the Curse! Go Indians.

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