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Apple Inc. (AAPL) Should Diversify

Apple Inc. (NASDAQ:AAPL)

With its HQ in California, Apple Inc. is America’s (and the world’s) largest technology by revenue ($234 billion in 2015) and by assets ($291 billion – as of 2015.) Despite their success, they would suffer heavily if the technology sector was to be adversely hit/affected, as they operate almost exclusively in this sector. Apple could make themselves a more attractive, long term investment proposition by diversifying. Apple has a very strong and large international customer base. They are active in the tech sector in a number of different ways e.g. they produce and sell goods, such as the iPhone or their iPad Pro & they sell music (Apple’s iTunes is the largest retailer of music.) 

Apple Inc's Apple Store NASDAQ:AAPL

Apple in contrast to Blackberry

BlackBerry’s phones use to be in high demand, but consumer tastes changed very quickly, and the firm saw a massive reduction in the demand for their phones. This is perhaps the reason why BlackBerry has been making a loss for a long period of time. BlackBerry’s share price peaked in 2007, reaching a price in excess of $230 per share. As of February 2016, their stock is currently trading at less than $7 a share (more than 30 times less than it was less than a decade ago.) BlackBerry’s dramatic decline outlines what could potentially happen to Apple. Apple does have a few different revenue generating sources in the tech sector, but they could hedge their position better, perhaps by entering new sectors.  

Apple has cash available for expansion

Apple has lots of capital and resources available, so they should consider entering sectors that are currently expanding, with the potential for lucrative financial rewards (for example, the automotive industry or the pharmaceutical industry.) Due to its sheer size and success, Apple could quite easily enter both of these sectors (they would be able to overcome barriers that most firms would be troubled by), and potentially be successful in them. 

Apple could enter these sectors by launching their own companies. Alternatively, they could acquire a firm that is already operational in those sectors, or they could provide early stage venture capital to funding to high growth firms (in return for a stake.) 

Either of the above would undoubtedly make Apple a better rounded company, as they would be less reliant on the growth of the tech sector, and their dominance in the tech sector. Despite the benefits, it is unclear if Apple is actively looking to enter new sectors. Their entry (if highly successful) may be bad news for businesses already operating within those sectors. 

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