Analyst: Apple needs new services to succeed because existing ones will slow significantly

“Bernstein analyst Toni Sacconaghi wrote Thursday that Apple Inc. needs to succeed with its new services offerings given that he predicts the company’s existing services business could start showing growth of less than 10% in the next three or four years,” Emily Bary writes for MarketWatch.

Services growth is critical in driving Apple’s overall top line, as well as potentially stabilizing overall company gross margins, which have fallen in each of the last five years. Given that Apple’s installed base should be relatively flat going forward, services growth will likely depend entirely on additional [average revenue per user] expansion, whether through new offerings or increased monetization of existing businesses. — Bernstein analyst Toni Sacconaghi

Bary writes, “Sacconaghi sees some potential in newer services.”

Read more in the full article here.

MacDailyNews Take: No surprises here. As always, Sacconaghi basically states the obvious: Apple will need to execute in order to succeed.

Also, you can’t predict that “Apple’s installed base should be relatively flat going forward” as there is tremendous headroom for Apple’s TV app, driven by Apple TV+ hit(s), spreading rapidly to non-Apple TV users via new Apple TV units and, especially, new smart TVs.

Apple News+, Apple TV+, Apple Card, and Apple Arcade each hold tremendous promise, that much is sure!

Related articles:
Samsung becomes first TV manufacturer to launch Apple’s AirPlay 2 and Apple TV app – May 13, 2019
Apple’s all-new Apple TV app available in over 100 countries starting today – May 13, 2019
Innovation isn’t required for Apple TV+ to become a big hit – April 9, 2019
Samsung 4K and 8K TVs that support Apple’s AirPlay 2, iTunes Store go on sale – February 11, 2019

9 Comments

  1. The fact that Apple does not have a movie streaming business is unimaginable. Tim Cook moves so slowly that it is hard to get excited about any future Apple innovations. Where is AR? Apple should be leading this. Homekit is a disaster. As far as the Apple TV app I am not impressed. I am though interested in the Apple TV + name is so similar to Disney + Maybe Apple buys Disney’s entertainment division. Tim should have already made a significant investment in it by now.

  2. Realistically there’s only so many low-hanging fruit service sectors to be had, like device categories. Technologically we are far FAR away from major new categories. Once Apple has streaming movies and TV and a new electric car it’ll be a while longer before anything else, just refinements of what we already have.

  3. It’s also unimaginable why Apple didn’t get into the cloud business as all the other major tech companies did. Apple had plenty of seed money to start or acquire a cloud business. Supposedly, the cloud is really low-hanging fruit with tremendous growth opportunity. What was Apple doing with the data centers they were building? I’m just surprised Apple didn’t have any backup plan beyond raising iPhone prices to offset a slowing iPhone business.

    While Apple struggles to move hardware, both Microsoft and Amazon are simply sitting back and hosting services with big companies who are just lined-up and begging to have all their data placed in the cloud. Wall Street was always saying how cloud businesses had unlimited growth potential and its obvious Apple wasn’t paying any attention. I’m sure Apple must have realized at some point that the smartphone business was close to saturated and relatively mature.

    Currently, Apple is the only major tech company that is said to have serious stagnation problems. If you looked at Amazon’s and Microsoft’s analysts’ buy and strong buy recommendations, they put Apple to absolute shame.

    Doesn’t Apple realize if consumers stop buying Apple products, Services growth will suffer? I’m not angry at Apple as I have done well by them, it’s just that I have to wonder what Apple’s goals are and why they’re losing out to Amazon and Microsoft when Apple has plenty of resources to do better.

    Apple should have kept giving out unit sales information because it really doesn’t make a difference. All the analysts are still focused on iPhone sales, anyway. It’s not as though analysts are going to do what Apple tells them to do.

  4. Hardware comes before services.
    Ditch the butterfly keyboard and deploy a new system from scratch. Refresh the entire MacBook line.
    New Mac Pro
    New displays, routers, etc.
    Keep the iPad, iPhone lines fresh with multiple price points, physical sizes, processor capabilities, etc
    Add to the iMac line.
    Professionalize ICloud
    iTunes can host a streaming thingy, name recognition counts.

  5. “If Apple doesn’t do a, b, c, e, ….. …… x, y and z, they are utterly doomed”.

    Oh gawd! For how many years and in how many variations have we been hearing this!!!!!!!!!!!!!!!!!!!!!!!

  6. Sean, I wish I could give you a million STARS. I first started following Apple centric blogs back in ’97. The story line today is the dame as it was 32 years ago, and all written by the same idiots that continue to sound an alarm that never comes.

    Thank god these “experts” aren’t running Apple.

  7. New Apple TV app is a nothing burger. Finding the new Channels is like a scavenger hunt. Thumbnails are oversized. One thing is clear: the best UI people left some time ago. Maybe the beats acquisition forced them out? Because AM 1.0 was oh nelly bad!

    Apple has no B2B in their DNA. A cloud service would have been nice…but there’s no one there with that kind of vision.

    Much of the services revenue is that big fat Google Search contract.

    However.
    Apple Card will rock
    Apple Health will rock
    Apple Arcade might rock

    1. “Much of the services revenue is that big fat Google Search contract.”

      It’s odd how people on these forums do math. Apple services revenue is on track to hit $100 billion within three years. Google’s payment to Apple might be around $12 to $15 billion at that time. I’m not sure by what mathematical method you define 12 to 15 percent as “much of the services revenue”.

      Very odd.

  8. Nothing will stop the demise of Apple. Every company has a growth path that eventually peaks, then flattens and finally starts retreating. Like most American firms Apple has become fat, overconfident and arrogant. And whatever Trump does, Asia will eventually sweep them off the floor.

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