iPhone expected to bear fruit for Apple for years to come – Omaha World-Herald


CUPERTINO, Calif. (AP) — The Apple of today hasn’t yet shown much indication of emulating its co-founder, Steve Jobs, and his streak of world-changing products, but it’s 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 — even if Apple fails to come up with “the next iPhone,” 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 Cook’s pay as a result. But stock market sage Warren Buffett and other investors have been betting on Apple’s continued success. Its shares are already up nearly 20 percent in the first two months of 2017, hitting record highs and boosting the company’s market value to roughly $720 billion.

The recent gains helped keep shareholders in a mostly upbeat mood last month during Apple’s 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 Cook’s reign, is the world’s best-selling smartwatch. Unfortunately, smartwatches just haven’t captured the public’s fancy the way the iPod, iPhone and iPad did during the decade leading up to Jobs’ death in 2011.

Now, online music streaming is turning the iPod into a relic, and the iPad’s 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 “financial engineering” — for instance, spending $47 billion buying back stock and paying shareholder dividends — than it is in coming up with new product ideas.

Cook wasn’t 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.

“All of these are essential to Apple’s growth,” 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 — and more expensive — iPhone to celebrate the device’s 10-year anniversary, spurring a “super cycle” 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 aren’t 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 “ecosystem” 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

What’s more, iPhone fans tend to have higher incomes, allowing them to spend more on apps and services such as Apple’s music subscription service. Apple typically collects a commission ranging from 15 percent to 30 percent of sales from apps sold in its store — the only way to reach the vast majority of iPhone users.

The formula is turning the app store into Apple’s 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 — an amount that would almost rank that business among the 50 largest U.S. companies.

Copyright 2017 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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