Apple's World Domination Shows No Sign of Stopping
Apple revealed blockbuster quarterly financial results Tuesday that were so big, so surprising and so good that the Internet strained to put the results into context.
The company sold a record number of iPhones -- around 34,000 iPhones every hour, 24 hours day, for the entire first fiscal quarter. Sales grew to $74.6 billion in the quarter, from $57.6 billion a year earlier -- a jump that is like tacking on all of eBay’s annual revenue and then some in just three months. Profit jumped more than 37 percent to $18 billion. At a time when overall mobile-phone prices have dropped, Apple can still charge $649 for an iPhone in more places around the world.
Yes, at some point, that kind of growth will flatten or the margins will come in. Apple’s markets will become saturated with jumbo iPhones or a product line -- just like the iPod -- will become obsolete. A new killer device will have to be found and sales will dip while the company tries to concoct a new, shiny piece of industrial design magic.
That’s what you call a cycle -- the business world equivalent of the circle of life. Worrying too much about it now ignores what Apple has done and why the company remains such an important force in tech innovation.
Apple has created products that work so well that customers aren’t just snapping them up in record numbers; customers trust its products to ease them into tech trends that have yet to blow them away, such as fitness tracking and cars that run apps, and get them to adopt tech trends they've been slower to adopt, such as mobile wallets and connected home devices (aka the Internet of things).
Chief Executive Officer Tim Cook told investors that his hopes lie in the company’s latest software platform initiatives -- HealthKit, HomeKit, CarPlay, Apple Pay. Apple didn’t come up with any of these technologies first. But the device that controls this software, the iPhone, is proving to be an ever-more-popular remote control for our lives, so these platforms have a shot at becoming the most popular ones.
Apple Pay is a great example of how Apple has helped spur adoption of a trend far better than other companies have. Cook wouldn’t break out actual numbers, but he noted that at Panera Bread, 80 percent of mobile payment transactions are made via Apple Pay. Whole Foods has seen mobile payments increase by more than 400 percent since the payment software was introduced in its stores. While those numbers represent a tiny payment base, Apple’s mobile wallet results are better than anything PayPal, Square or Google have been able to produce.
The iPhone’s popularity -- and the related popularity of Apple's app store and other related software -- is giving a boost to the app developers who create for the Apple ecosystem. Tech blog Cult of Mac notes that iOS app developers earned more last year than the film industry did from U.S. box office revenues. Adoption of software such as Apple Pay also helps out the big companies -- say, Visa -- that partner with Apple.
An entire ecosystem of startups build devices that work with the iPhone; those devices include the early iteration of the Square credit card reader and miniaturized lab diagnostics devices that can be plugged into a smartphone and give real-time test results. Some of those devices are being designed to work first with Apple. And huge companies such as Qualcomm and Samsung -- two of the only companies that can produce the components Apple needs at the scale that it requires -- benefit greatly when Apple uses their chips.
If consumers embrace the Apple Watch, the smartwatch could add to the overall virtuous circle of Apple’s hardware and software, of consumers trying new stuff and companies making new stuff.
Apple has been pretty good for investors, too. Business Insider notes that the information technology sector is expected to show 3.8 percent growth for the fourth quarter of 2014, but only 0.1 percent growth if you take Apple out of the mix.
I don’t actually think that the company makes the very best software. (I have an avowed dislike of iTunes and think that the battery life of Apple devices is usually terrible.) But Apple has created an extraordinary -- and extraordinarily profitable -- world of hardware and software that consumers have embraced. That popularity is helping to drive more useful innovation and interest in tech than most of the moonshots we read about every day.
What will be more interesting to see is how the Apple halo continues to light up so much of the tech landscape, then see what takes off and succeeds before that light inevitably dims.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Brooke Sample at email@example.com