By now, everyone knows that Apple has enjoyed blowout sales in the last financial quarter, mainly thanks to the astonishing success of the iPhone 6 and 6 Plus. The news last week helped propel Apple’s shares to an all-time high a few raised eyebrows in the tech world.
But many people will be wondering what can Apple do to sustain its impressive growth, and of course the perennial question over whether Apple still has the ability to innovate under Tim Cook. So what comes next for Apple?
Apple smashes previous records
Apple has always been accused of “losing” the smartphone race against Android and its manufacturers like Samsung, who ship millions more devices but who don’t in fact make as much profit. With the introduction of the new iPhones, Apple has sold as many smartphones in the last quarter as Samsung – exactly the same amount in fact – a whopping 74.47 million iPhones in the three months to December last year.
Apple has grown to depend on the iPhone for the vast majority of its profits, a statistics nicely illustrated in the infographic below. Analysts of course worry that this dependency on a single model lineup is a potential disaster waiting to happen if something else comes along as replaces the iPhone, or sales suddenly collapse.
While Apple has enough cash reserves in the bank to weather most storms (currently around $178 billion), there is still a long term risk if sales start to fall off, but CFO Luca Maestri and CEO Tim Cook have both stated they’re very optimistic about Apple’s other products.
Here’s a quick rundown of some of Apple’s most important products and services during 2015.
Apple plans to sell the Apple Watch in April, according to Tim Cook, who revealed the date in the financial earnings call last week. He said that developers are hard at work on creating new apps and “glances”, many of which will be finalised this month in order to be ready for the April launch.
Cook also revealed that he is wearing the Apple Watch every day and “can’t live without it”. However, many analysts are skeptical about the potential success of the Apple Watch, often citing surveys and studies that claim consumer interest is low.
“We continue to believe interest from consumers is tepid”, said Piper Jaffray’s Gene Munster in a recent investor note. Apple has also been rumoured to be fitting out its stores with high security safes that will house the gold Apple Watch, expected to be sold for several thousand dollars, so things are already moving quickly ahead of the launch. Even if a tiny fraction of the world’s hundreds of millions of iPhone owners bought the Apple Watch, sales for the full year 2015 could still run into the tens of millions. While that won’t make a huge difference to Apple’s fortunes, it’s likely to be another reason to stay in the Apple ecosystem and make it more difficult and inconvenient to switch to alternatives down the line.
Apple announced its wireless payments service last year at the iPhone 6 event in September, but Tim Cook has boldly said that 2015 will be “the year of Apple Pay”, such is the confidence in the new system. 750 banks in the U.S. have signed up for the service, which now claims more than two-thirds of all mobile payment systems. Pretty impressive numbers, that demonstrate that in just a few short months, Apple Pay is rapidly becoming the most popular payment system for smartphone owners.
Apple collects fees every time someone uses Apple Pay, and even though those fees are reportedly not substantial, it will make a difference to the company’s bottom line over time. However, rather than being a source of revenue for Apple, it is intended to attract would-be iPhone owners to the platform and provide a more seamless way to purchase goods.
According to Apple a record number of Macs were sold last year, resulting in a 9% rise in sales. Even as the PC market remains stagnant, Apple continues to buck the trend and grow Mac sales thanks in part to updated products such as the Retina iMac (which has a 5K ultra hi-res screen). For 2015 Apple is said to be working on a radically updated MacBook Air — one of its best-selling Macs — with a much thinner fanless design and less external ports, made possible by using Intel’s new Broadwell chipset.
While Macs are expected to continue their upwards trajectory in the foreseeable future, the same can’t be said for the iPad which suffered a drop in sales by 22%. The tablet market in general has been on a downwards slope for more than a year now, possibly due to longer replacement cycles and not helped by the rise of so-called phablet smartphones (i.e. those with huge screens over 5.5 inches). Research has found that users with phablets reach for their tablets less often than those with mid- and small-sized smartphones.
Maestri said that surveys have shown consumers love using the iPad for shopping and browsing the web, and he also highlighted new apps created in partnership with IBM are expected to increase business uses for the iPad.
The iPad has “a very bright future,” according to Cook, although he said he doesn’t expect sales trends to change in the next few quarters.
iPhone sales have rocketed in China, Brazil and Singapore, in the face of competition from Chinese companies like Xiaomi and Huawei, as well as South Korea’s Samsung in particular. It was recently noted that a huge proportion of iPhone purchases were made by first-time buyers and former owners of Android devices who have made the switch.
For the last quarter, Apple made $74.6 billion in sales and $18 billion in profit, an increase of 30% and 38% year-over-year. As a result, many of the prominent Apple analysts have raised their forecasts accordingly.
The challenge will be to keep breaking records, as the time must come when growth cannot continue upwards forever. In China, the company’s aggressive retail expansion is an encouraging start that should buoy sales and boost Apple’s image as a premium device maker, but just how long can it go on for?
For now at least, it seems that Apple just needs to keep on doing what it’s already doing so well…