iPhone expected to bear fruit for Apple for years to come – Omaha World-Herald
CUPERTINO, Calif. (AP) â The Apple of today hasnât yet shown much indication of emulating its co-founder, Steve Jobs, and his streak of world-changing products, but itâs still proving a tough act to beat.
The main reason: When Jobs died in 2011 he left behind the iPhone, a product with such a devout following that it will likely spin off billions in profit for the foreseeable future â even if Apple fails to come up with âthe next iPhone,â whatever that might be.
Apple stock up 20 percent so far in 2017
True, Apple recently reported its first annual sales slump in 15 years and docked CEO Tim Cookâs pay as a result. But stock market sage Warren Buffett and other investors have been betting on Appleâs continued success. Its shares are already up nearly 20 percent in the first two months of 2017, hitting record highs and boosting the companyâs market value to roughly $720 billion.
The recent gains helped keep shareholders in a mostly upbeat mood last month during Appleâs annual meeting at its Cupertino, California, headquarters. It was the final meeting on this Silicon Valley campus; Apple is preparing to move into its new headquarters, Apple Park, a nearby 175-acre site anchored by a spaceship-shaped building glistening with curved glass.
Since the Apple Watch, the company has been in a dry spell
The Apple Watch, the only new device introduced during Cookâs reign, is the worldâs best-selling smartwatch. Unfortunately, smartwatches just havenât captured the publicâs fancy the way the iPod, iPhone and iPad did during the decade leading up to Jobsâ death in 2011.
Now, online music streaming is turning the iPod into a relic, and the iPadâs sales have fallen for the past three years.
Those challenges prompted one shareholder speaking at the annual meeting to question whether Apple is losing its innovative touch. He said the company seemed to be doing a better job of âfinancial engineeringâ â for instance, spending $47 billion buying back stock and paying shareholder dividends â than it is in coming up with new product ideas.
Cook wasnât on stage at the time that point was raised, but later in the meeting he said that Apple still generates nearly 40 percent of its revenue from products other than the iPhone.
âAll of these are essential to Appleâs growth,â Cook said.
But nothing is more fruitful than the iPhone, even though Apple has offered only relatively minor upgrades and changes to the device since 2014, when it first released a model with a larger screen. That stasis has also taken its toll. Many users found no compelling reason to trade in their older models, and iPhone sales fell last year for the first time since its introduction in 2007.
Apple reversed that trend in its most recent quarter, if only barely. Analysts expect sales to accelerate this fall, predicting that Apple will unveil a souped-up â and more expensive â iPhone to celebrate the deviceâs 10-year anniversary, spurring a âsuper cycleâ of buying.
Consumers are apathetic, but addicted to smartphones
Still, it is increasingly difficult to get consumers excited about smartphones. These modern slabs of glass and metal are all pretty much capable of doing just about everything that people want, said analyst Jan Dawson of Jackdaw Research.
Even if they arenât buying new models as frequently as they once did, iPhone owners tend to be fiercely loyal to the brand. When they do get around to buying a replacement, they usually stick with Apple, whose âecosystemâ of apps and services tied to the iPhone makes switching especially painful. (Google is now trying to do much the same thing with Android-based phones.)
Apps and services is Apple’s fastest-growing segment
Whatâs more, iPhone fans tend to have higher incomes, allowing them to spend more on apps and services such as Appleâs music subscription service. Apple typically collects a commission ranging from 15 percent to 30 percent of sales from apps sold in its store â the only way to reach the vast majority of iPhone users.
The formula is turning the app store into Appleâs fastest-growing business. Services revenue rose more than 20 percent last year to $24.3 billion. Within the next four years Apple believes its service revenue will double to nearly $50 billion â an amount that would almost rank that business among the 50 largest U.S. companies.
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