Apple Inc. gets more than 60 percent of its revenue from the iPhone, and it has built one of the largest businesses of modern times on the back of the device. The wheels are, if Wall Street research houses are to be believed, about to come off that particular cart. Apple stock has suffered as a result, and many are wondering what Tim Cook and his team is going to do next. Daniel Ives of FBR Capital seems to think the firm has little left in the tank.
In a report on the future of the Cupertino firm, in which he speculated on buyout targets, Mr. Ives said that he reckons the iPhone 7 release date might be the end of an era for Apple. That’s not going to be a popular opinion among those with shares in the Tim Cook’s, but it’s one worth considering nonetheless.
Giving up after the iPhone 7
According to Mr. Ives, the iPhone 7 may “be the last hurrah in terms of blockbuster upgrades.” He reckons that Apple is going to slow down in both sales and feature growth. That leaves Apple with a quandary that he seems to think is best solved by splurging cash on a buyout. The report was widely covered for looking, once again, at the possibility that Apple might try to buy Tesla Motors Inc .
Apple Inc. isn’t going to buy Tesla Motors. Most people would be better off assuming the truth of that and moving on. What’s interesting about the report is the declaration of the end of the iPhone. Mr. Ives isn’t suggesting, of course, that there’s nothing Apple can do with the device or that it’s going to run into problems
Instead he seems to be suggesting that Apple has run into a similar problem with the iPhone that it did with the iPod back in 2005 or so. All of the features that people really want have been added, and everything new will only be a marginal improvement. Of course a better camera would light up some people’s lives, but the camera on the iPhone 6S is great and most aren’t asking for more.
The same goes with the chip inside the device. Much more than on PCs, apps on mobile tend to be constrained by the speed of the latest iPhone. No app maker is going to release something that needs more power than the iPhone 6S provides because nobody can get their hands on that sort of device. Apple will keep improving its processing and graphics power, but the leaps aren’t going to be as great, at least to users, as in the past.
This kind of logic goes in all sorts of areas. The upgrade from a BlackBerry to the iPhone was huge, and so was the upgrade from the iPhone to the iPhone 2. The boost from the iPhone to the iPhone 6S wasn’t quite as dramatic. Very few people will be able to list the differences between the phones very accurately.
It’s true that it becomes tougher and tougher for Apple Inc. to impress with each new generation. The iPhone 6 was, however, incredibly impressive in terms of sales. All Apple did to secure the surge was make the screen a bit bigger. It’s likely that Apple has already hit a bit of a limit on that front, but the firm may yet find another tweak that the world finds just as impressive.
What can Apple do after the iPhone 7?
Just because the iPhone 7 is going to hit an addressable market that is mostly saturated doesn’t mean that Apple is done for. Even if the firm never finds its magic touch again and its smartphone design stays stagnant, Apple has plenty of other paths along which to grow.
Some of them are closed off. It’s not likely at this stage that Apple is going to get into the massive cloud services business to compete with Amazon.com Inc. and Microsoft Corporation. Similarly it’s wouldn’t be good to rely on the firm becoming an advertising giant in the coming years. That appears to be against Tim Cook’s ethos.
However Apple is apparently building a car, and it’s got a piece of hardware in almost every category on the market. iPhone sales will fail at some point, but Apple may be able to back them up with growth in other areas.
We don’t know what the iPhone 7 is going to look like, and we really don’t know how the device is going to sell. One thing is clear though. Wall Street reckons that Apple’s days of huge growth may be behind it, and traders have been selling Apple stock en mass as a result. On Monday the firm’s shares closed at $107.33. That’s below their the full year 2015.
Apple Inc. knows what it’s doing
Stating that the iPhone 7 release is going to be the firm’s last blockbuster smartphone launch ignores some very recent history at Apple. It’s clear that the firm isn’t going to be able to make the iPhone 7 or iPhone 8 much bigger to keep raising sales, but there’s lots of features and design tweaks that people like Tim Cook and Jony Ive are likely thinking about to boost sales.
It’s possible, of course, that Apple will fail in the quest to find the next big thing. If that happens it’s not clear where the firm would make up the shortfall. It has no business that’s even half the size of its smartphone segment, and nothing looks like it’s going to get there any time soon.
The iPhone 7 is likely be a monumental release for Apple, just as the iPhone 6 was before it. People who refused to believe that the firm was able to grow sales after the iPhone 5S were shown wrong, and betting against Apple right now seems like a huge risk.
Even if the firm doesn’t manage another blockbuster after the iPhone 7, it’s likely to hold onto a massive part of a massive market. Apple has almost monopolized the premium market in the Western world and it’s on its way to doing the same across the rest of the globe. Even if the iPhone 7 is a ” last hurrah” the iPhone 8 is going to make more than $150B. That’s not a bad return for shareholders.