Apple is transitioning from product company to service giant

“An accounting decision by [Apple’s] management this past quarter indicates where the company is heading,” Vishesh Raisinghani writes for Seeking Alpha. “Apple plans to halt publishing unit sales figures and average selling prices for iPhones, Macs and its other product lines. In other words, everything physical will be lumped together.”

“I think it’s reasonable for investors to assume this move implies softer sales figures. However, I think the decision also indicates a paradigm shift in Apple’s fundamental business model,” Raisinghani writes. “I believe Tim Cook and his team are trying to transition the company away from Jobs’ vision of the ‘ultimate product company’ to an ‘efficient services provider’. I believe Apple has depleted its product pricing and unit growth potential and will have to squeeze out growth by selling more services to its installed base. At least until new products are developed.”

“If it were a standalone business, Apple’s services would be nearly as large as Facebook in terms of revenue. The division brought in $10 billion in this recent quarter and there’s no reason to believe it can’t beat $40 billion in annual revenue over the next twelve months. FB’s TTM revenue was $48 billion,” Raisinghani writes. “As a standalone company, Apple Services Inc. is probably worth $344.25 billion (all my estimates above combined). That’s a third of Apple’s market cap. About one-fourth of the company’s market cap is pure cash.”

Read more in the full article here.

MacDailyNews Take: The key phrase: “At least until new products are developed.”

SEE ALSO:
Apple wants to keep its secret formula secret – November 6, 2018
Why Apple’s unit sales reporting doesn’t matter anymore – November 2, 2018
The ‘smart money’ shrugs off Apple’s decision to no longer disclose unit sales – November 2, 2018
Apple rams their message home: Think ‘Apple as a Service’ – November 2, 2018
Investors bristle as Apple occludes iPhone unit sales data – November 2, 2018
Apple’s decision to stop reporting unit sales of iPhones, Macs, and iPads is a ‘defining moment’ – November 2, 2018
Apple to stop reporting iPhone, Mac, and iPad quarterly unit sales – November 1, 2018
Apple tumbles 7% after reporting record-breaking quarterly earnings – November 1, 2018
Apple beats Street with another record-breaking quarter – November 1, 2018

14 Comments

  1. I’ve got to say, Apples lack of new or updated products is so obvious, that there is nothing “new” for an investor to get excited about, Just updated at best, The watch is finally decent,
    but otherwise what? a smart speaker that Amazon and Google not only beat them to the punch with, but did it better?

    The point is, there is plenty of Market share for every Apple product that their sales department simply isn’t showing any signs of embracing, let’s face it, Apple products any way you slice it have 10% of the market share in any category,,, why? I’m tired of the “Best Customers” argument,,
    Apple just got destroyed with that philosophy just as Hillary did by calling out potential fans (customers) saying they’re “deplorable”

    What’s the last “killer App” they created?
    Pro Market? we all know they walked away from that,

    Go back to the message threads right before Christmas last year, everyone was after Tim Cooks head, with no product updates, no speaker, missed product lines for the holidays, and more,

    Even the commercials I’m seeing for their new phones are still the stealthy “look how cool” without telling one option that puts the phone above the competition.

    And they’re moving at a glacial pace.

    Point is, they even HAVE the goods, Its not acceptable that they got destroyed because they couldn’t move out a few million more phones, when they only have 10% or less of the market, There are plenty of customers out there, Apple wasn’t aggressive.
    Perception is everything. We stockholders just took a bath.. You’re either gaining customers or you’re not.
    ABC
    Always Be Closing

    1. Seriously.. lack of updates…..???

      They have the best lineup for this holiday season than they have had for a very long time…
      I suggest you review apples site..

  2. It all good now.

    We’ll see a bigger picture how good Apple is at milking $$$. Lets face it, the blew it again last quarter and the stock is down 7% based on estimate for the next quarter?!?!?. How crazy is that?

    The rules no longer apply when a bigger than big company is grabbing 70% of the sector’s profit??

    Lets see how it unfold…

    1. Blew it????? Lol

      Yup they Blew it again by breaking all records!

      Why do u guys even bother polluting peoplea mind with disinformation!
      Do u get a kick out of it.. or someone pays u to do so?
      It is stupid !

      Here are the facts about last earnings which u catagorize as blowing it..🤦‍♂️

      Revenue Up 20 Percent and EPS Up 41 Percent to New September Quarter Records
      Services Revenue of $10 Billion Reaches New All-Time High
      CUPERTINO, California — November 1, 2018 — Apple today announced financial results for its fiscal 2018 fourth quarter ended September 29, 2018. The Company posted quarterly revenue of $62.9 billion, an increase of 20 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.91, up 41 percent. International sales accounted for 61 percent of the quarter’s revenue.
      Services revenue reached an all-time high of $10 billion. Excluding a one-time favorable adjustment of $640 million recognized in the fourth quarter of fiscal 2017, Services revenue grew from $7.9 billion in the fourth quarter of fiscal 2017 to $10 billion in the fourth quarter of fiscal 2018, an increase of 27 percent.<<<<

      1. Sorry Yo,

        I am not a perfect english dude. To me blew it meant they did it again; breaking records…

        I am not against, I am a shareholder. I just don’t understand how WallStreet can punish AAPL that bad… It is out of my understanding.

        1. My appologies if i missunderstood you .
          But my understanding is that when one blows something or the idiom .. ‘blew it’ means ‘screwed it up’ … in general .
          Here is a litte definition from the web:

          I Blew It. Meaning/Usage: Used to tell someone that you made a big mistake. Explanation: When something blows up, it is destroyed. Therefore, blow up implies in this context means to make a big mistake to damage any opportunities.
          https://www.talkenglish.com/lessondetails.aspx?ALID=1061

  3. With this transition Cook is making Apple as beloved as the local cable company, digging into your pocket every month no matter what.

    I miss the old Apple that actually acted on its promise to delight customers.

    1. They have certainly delighted me with this seasons product lineup.

      Sure there are issues.. there will always be.

      But i am a customer, an enthusiast and i am delighted.

  4. “I think it’s reasonable for investors to assume this move implies softer sales figures.

    ‘I think’ , reasonable, assume, imply .. all words that dont make a solid statement about any facts. All they say is what the Author Feels

    Well Mr. Vishesh Raisinghani.
    To each his own..
    But you know what the say about assuming .. right?
    Add on top all other words used in your sentance.

    No it Is not safe for investors to assume ‘your comment’ just becouse you choose to find it safe to assume so ! ..based on your feelings and deductions. So please state it as your personal feelings rather than generalize it towards whats all investors should find reasonable and safe to assume.

    Apple has a lot of room to grow at the level of market share they have in iphones which is 15.1% globaly… that leaves a lot to capture dont u think ? ( unless u also assume Apple is sleeping )

    They have an installed base of 1.2 billion+ and according to Tim Cook at the recent CC, that base is growing in double digits.

    Plus Apple has many other products with room for huge growth, not just iPhone….. not to mention new products their massive R&D will bring about as we move forward.

    Focusing on services and trying to expand and grow in that area and trying to increase market share in hardware are not mutually exclusive.

    Apple is not becoming a service company becouse they choose to get analysts obsession and focus away from unit numbers of a singular product and encourage focus on the company as a whole.

    So no.. i disagree with your comments…. Apple is not moving from Product company to services company as your headline indicates.
    And no its not reasonably safe to assume what u choose to ‘find implied’

    Apple is becoming Both……Product and Services company !

    1. The problem with such sentiments is that Apple’s services are ~99% aligned to their iOS product line.

      That means that there’s far less product base diversity – – and therefore much higher risk – – in the company. If the fickle consumer winds shift from iPhones to some other company’s offering, Apple is extremely vulnerable to becoming another “suddenly irrelevant” RIM, Nokia, Sony.

      And with Apple shutting down the photo print business that they started with iPhoto … we can see this “ALL IN” on the iOS ecosystem becoming even more precarious & risky.

      In the meantime, with ever-increasing ASP’s on iOS devices, Apple is trying to maintain profits through mark-up, not by really expanding the customer base. Note how this observation renders irrelevant the arguments that there’s “lots of room for growth”, since it is clear that Apple isn’t pursuing growth in their customer base. And similarly, its also why they’ve elected to no longer report units sold.

      Overall, the strategy that they are pursuing only works so long as there is a tangible, value-added proposition for customers for their products, and even then for only so long until customers revolt from excessive profiteering – – which is why the CATV industry has such a poor reputation. Once a viable alternative exists (which for iOS is already present and called Android), the bubble will invariably pop and there will be a giant sucking sound as customers defect en masse.

      And because Apple is setting themselves up as the iOS “One Hit Wonder” company without diverse product lines, as soon as the Street learns what’s really going on, the Market crash will be extremely ugly.

      Steve used to talk about moving on to “The Next Great Thing”, but the reality has been that the likes of the PC market has certainly faded, but it hasn’t gone completely away and even its decline wasn’t an ‘overnight’ thing: the only thing that really did disappear quickly were the companies who were poorly structured for change, especially those who didn’t have a broad & diverse set of products.

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