The iPhone is out of growth, so Apple wants to be seen as a services company like Amazon, Facebook, or Google. For Apple, services include things like app sales, iCloud revenue, Apple Pay, Apple Music, and iTunes.
This is a wonderful idea, but there’s a problem: Apple’s services revenue is tied to the strength of its iPhone business, which is projected to drop this year.
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Why is the iPhone falling? Because the global economy is shaky. Major markets, including Brazil, Russia, Japan, Canada, Southeast Asia, Australia, Turkey, and the eurozone, have been impacted by slowing economic growth, falling commodity prices, and weakening currencies.
So, Apple is in this weird cycle: It wants to grow services revenue, but services revenue depends on iPhone sales. Currencies are falling because the global economy is weak relative to the US economy, which is leading Apple to raise prices on the iPhone, which is hurting iPhone sales, which will limit services revenues.
Cook said people should be looking at Apple as a services business:
“We started breaking out services, as you know, in the beginning of fiscal year 2015. And as that business has grown and as it became clear to us that the investors wanted — investors and analysts wanted — more visibility into that business. The size and growth of these services tied to our installed base compare favorably to other services companies you’re familiar with.”
Of course, it isn’t that simple. Apple can wish people valued it a certain way. Wishing won’t make it so.
My 2 cents:
If Apple truly were a services company, it would lower iPhone prices, go for smartphone unit volume, then get more money from that. But it is not a services company and these service segments Apple are so far down the learning curve that they are border-line commoditized: cloud storage, e payments, and I’m sure music is on the hit list for products that the internet commoditizes for end users.