Tim Bajarin: Focus on services is critical to Apple’s long-term survival

“In a recent column, I wrote about a new great divide in Silicon Valley, in which one side believes the best business model is to sell products and services while the other side gives away services subsidized by advertising,” Tim Bajarin writes for PC Magazine.

“It’s becoming clear that those selling products and services — such as Apple, Amazon, and Microsoft — have perhaps the most sustainable models,” Bajarin writes. “Apple announced in its May 1 earnings call that its services revenue during the last quarter was $9.2 billion. This is a 31 percent increase from the same quarter a year ago; if made a standalone company on its own, services would be a Fortune 300 company.”

Bajarin writes, “While there is money to be made in hardware, PC sales continue to shrink and a focus on services is critical to the long-term survival of companies like Apple, Microsoft, and others.”

Read more in the full article here.

MacDailyNews Take: As we wrote last August:

Apple’s services business is an unstoppable locomotive that, someday, even Mr. Market might fairly value.

SEE ALSO:
Apple as a service: Services offer growth, visibility, and profitability – May 15, 2018
AAPL’s paradigm shift – May 11, 2018
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 2017
Inside Apple’s massive services results – August 9, 2017
Misunderstanding Apple Services – August 7, 2017
Dispelling the Apple Services myth – May 3, 2017
Apple’s Services business: $7 billion in revenue last quarter alone – May 3, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017

11 Comments

  1. couple quality-rich paid services with stout security and no one will touch Apple. Google, Amazon and FB have a compromised “respect” for security.

    1. Then why does Apple rely on Microsoft, Akamai, Amazon, and Google to host its cloud services? Apple can’t even run its own business without supporting these guys.

      If Apple was superior, wouldn’t your data be guaranteed to go nowhere hy are near these evildoers?

  2. apple services are driven by hardware sales. Unlike companies like Netflix most Apple services come from its own sold devices, i.e no iPhone or Mac sales means little services revenue (netflix runs on a variety of third party devices)

    largest part of Apple services monies come from ICloud, Apple care contracts , App store and Google search payments ( goog pays apple to be default ios search). Apple music etc don’t make much if anything (Spotify, Pandora, Netflix all lose money)

    Not keeping all hardware cutting edge but just depending on services rev is long term suicidal.

    Zero reason why Apple can’t do both: hardware (including massive money making Macs) AND services to top notch level

    1. “i.e no iPhone or Mac sales“
      Remove “or Mac” and you have a point. They could have zero Mac sales tomorrow, and it would have a negligible effect on the services earnings.

      1. so mac users don’t use Apple care or iCloud (probably the two largest components of services rev. ) ?
        I bet you a iMac Pro user is going to buy extended Apple Care coverage…

        And people use to stream music (iTunes is a service revenues) via their Mac Minis as a home server…. opps… well until Apple neglected Minis to death…. ETC.

        Talking about neglect, want to discuss the Mac App store…
        taken from Cue to Schiller? Loads of developer complaints … maybe the neglect, mismanagement is why it’s not a big earner ?

        Smaller developers ( most iOS developers are small companies btw) want a vibrant Mac App store as they don’t want to deal with the problems of setting up a storefront and dealing with VISA etc themselves .

        BUT:

        John Gruber “The Mac App store is rotting. There’s no other way to put it”

        WHY rotting ?
        Scott Kyle developer : “It’s a joke that they have barely updated the Mac App Store in five years”

        It’s CIRCULAR LOGIC : don’t update = bad revenues.

        Wrong Again you might argue (following your previous postings) that Macs have SMALL MARKET SHARE..

        BUT…

        Note Tim Cook said in 2017 there are 100 million Mac users which is MORE than Amazon’s Prime subscriber numbers in 2017 !!!!!!! (Amazon just pass 100m in 2018).
        And every pundit says Amazon’s PRIME subscriber base is ASTONISHING IN SIZE… !!!
        so it fault of Mac for not being utilized by Apple better ?
        or is just plain stupid neglect ?
        do you think Bezos with 100 million users won’t make a kick ass Mac App store ?

        (btw Other INDICATIONS of NEGLECT : why doesn’t Apple market Macs (no ads ) and not update then regularly ? Wrong Again you’ve argued before because they don’t sell well… but they just made another 5 BILLION last quarter with NO ADVERTISING and half the macs not updated . So is Apple neglecting Macs due to poor sales possibilities or just neglect.. ? )

        1. No, I don’t argue they don’t sell well. My statement is pretty consistently that Apple sees little value in the Mac. They are actively trying to kill the Mac so they can get on with the next thing. And, as a result of that drive to kill the Mac, they don’t sell well.

          1. “Apple sees little value in the Mac”

            you keep saying that and you might be right but if that is the case it’s pretty boneheaded because as I’ve often repeated : Macs are Apple’s SECOND LARGEST HARDWARE money maker , here Apple’s results last quarter:

            iPhone: 52.217 million units (vs. 50.763 million units, +3% YOY), $38.032 billion revenue (vs. $33.249 billion, +14% YOY)
            • Mac: 4.078 million units (vs. 4.199 million units, -3% YOY), $5.848 billion revenue (vs. $5.844 billion, 0% YOY)
            • iPad: 9.113 million units (vs. 8.922 million units, +2% YOY), $4.113 billion revenue (vs. $3.889 billion, +6% YOY)
            • Other Products: $3.954 billion revenue (vs. $2.873 billion, +38% YOY).

            The results clearly show the ‘value’ …

            If you say Mac’s smaller than iPhone, than so is iPad, Watch, tV , Beats etc. They are all smaller than Mac as well . In fact Mac is larger than Watch, TV, AirPods, Beats, accessories COMBINED (other products category) .

            Note also as I’ve argued before you are making a ‘value or money’ argument about Apple management decision over the Mac , and ‘value/money’ is only of interest to Wallstreet NOT to the consumer. But the bizarre thing is that the main reason Wall Street dislikes aapl (see the low P.E) is LACK of DIVERSiFICATION, Apple depends too much on iPhone. So this neglect of Mac due to ‘value’ as you are saying (to apparently please wall street) actually does the REVERSE…

            (the LACK of RESOURCES argument, ” get on with the next thing.” makes little sense if you remember $200 billion in the bank and see the resources they poured into the building and furniture for the Campus , Coffee table book , fruit orchard etc. Jony Ive was personally responsible for the Campus if you check his Apple.com bio the last few years)

            Maybe the real reason for neglect is because Ive and his fashionista designers are more interested in Watches or even iPhones which you carry on your person etc. Ive is now hanging around and want to impress mostly fashion, furniture designers like Newson who don’t really ‘get’ PCs. Try showing your new ‘PC’ box designs at one those fashion cocktail parties… (almost all of Ive’s interviews in the last few years has centred on the Watch or Campus. He didn’t attend the Mac Pro meeting although he was mainly responsible for the fiasco, Federighi the SOFTWARE guy attended… )

            Or maybe years back Cook thought iPad would continue to rocket up (it’s dropped to half peak sales of 2014) etc.

            But I think the FINANCIAL NUMBERs (and Wallstreet concerns of lack of diversification) are now impressing themselves on Cook on how he needs Mac (in direct contrast to your beliefs ) and belatedly they are going back to Mac with the iMac Pro and various model updates planned. Note I’ve never seen them tell their consumers several times updates on a product like the Mac Pro. I think Cook has somewhat got over his ‘Jony Ive awestruck fear’. Cook has assigned a senior manager Ternus on Mac . (He even did a few web ad spots for iMac Pro… ! )

            (Note I’m not saying Macs services revenue is very big compared to iPhone but together with hardware sales Mac generates significant revenues).

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