Apple now a purely for-profit company

[Pangalactic]

I believe this is important to discuss now that Apple has reached a trillion dollar valuation what the company actually does and why it does it.

I think it is important for Apple users to understand the fundamental shift that has happened to Apple between Steve Jobs and Tim Cook.


Under Jobs, Apple had a variety of products that it constantly introduced or improved. Mind you, that was not necessarily the best financial decision, but it did create a reputation for Apple (and for the userbase) that it is still riding on.

Under Tim Cook, Apple has just one objective: maximum profit for the shareholder. Which it is very successfully accomplishing, no questions about that. The consequence, however, is how much the non-so profitable products have suffered.

Let's have a look at this:

This is Apple's revenue by product for Q1 2018. It differs from quarter to quarter: but the main take-aways is that iPhone + Services make around 80% of Apple's revenue at any time.

So knowing that Apple is a for-profit company, we can easily derive where their efforts will go:

80% on iPhone development and services
20% on EVERYTHING else.

And this literally explains all the Apple's product development.

Why hasn't the Mac Pro been updated since 2013? Cause it doesn't make enough money.
Why haven't the MacBook, MacBook Air, Mac Mini or iMac been updated in over a year? Cause they don't make enough money.
Why are the new MacBook Pros completely glued together? Cause repairs will bring now even more money.
Why it's impossible to get repair components for iMac Pro, no one at Apple stores knows how to repair them (check Linus or Snazzy Labs with their stories)? Cause they simply don't make enough money so there is no reason to put more effort into them.
Why are the prices for ALL Apple product increasing to never-before-seen heights (iPhone, Macbooks, iMac Pro)? Cause Apple wants to be as profitable as possible and will keep raising the prices. They have figured out that they have a very loyal fanbase with inelastic demand (so raising the prices will cause complaints but not really a lot of people shifting to other products), so raising the prices just makes them even more money.


Moving on to the final part - what does that mean for the future?
Very simple: Apple will just go where the money is and abandon everything else. Products will become even more expensive with no replaceable or self-repairable components. They definitely haven't reached the limit yet when people refuse to buy Apple products because they are too expensive, so there is no reason to not further raise the prices. Being successful and profitable has very little to do with being nice to consumers

 

[macnmac]

wait... apple isnt a non-profit?

 

[Audit13]

When has apple ever operated as a non-profit or charity?

Same can be said for any widely-held corporation whose stock is traded on a major exchange.

 

[MacDawg]

No wonder they have been under fire for taxes
Perhaps a review of their 501 (c) (3) is in order

 

[Pangalactic]

wait... Apple isn't a non-profit?

When has apple ever operated as a non-profit or charity?

It was operated in a fundamentally different way, with a variety of products constantly being introduced and updated, must superior customer service and lower price points. It was definitely profitable, but the main focus was not on the profit, it was on customer experience and rapid expansion into new markets. One example is the number of products it kept up-to-date compared to the current Apple, which does not maximize the profit but raises the customer experience and brand value overall.

 

[PhoneI]

complete nonsense

 

[Audit13]

It was operated in a fundamentally different way, with a variety of products constantly being introduced and updated, must superior customer service and lower price points. It was definitely profitable, but the main focus was not on the profit, it was on customer experience and rapid expansion into new markets. One example is the number of products it kept up-to-date compared to the current Apple, which does not maximize the profit but raises the customer experience and brand value overall.

Apple has changed their business lines too increase profit over the years just like any other going concern and increased their brand value tremendously. I think apple still has superior customer service and they are slimming down their product lines to prevent cannibalization of sales. Can't say I blame them. They have concentrated their efforts on making money just like other corporations.

There are always two sides to every argument IMHO: one from the shareholder side and one from the consumer side. In the end, it's the money that keeps the shareholders and stock value.

If I were an Apple shareholder, I would have no problem with how they are conducting business.

 

[TheAppleFairy]

Most people start businesses for profit. It's what motivates people/businesses for greatness.

 

[Razzerman]

It was operated in a fundamentally different way

I'm gonna stick my neck out and say I see where you're coming from. When uncle Steve was at the helm, the sales/profit were a by-product of his vision and passion for the products he truly believed in. I don't think Cook has either of those qualities, but he does make a great bean-counter, and emoji salesman.

 

[Audit13]

Many things have changed in the years since the passing of Steve Jobs. Would Apple have been swallowed up or taken over by another company had Apple not become so profitable? We'll never know for certain; therefore, we must deal with the Apple of today and not the Apple of yesterday. As consumers, we have the option of voting with our wallets.

 

[JPack]

You've just realized this?

• 2001-2005: Apple's revenue largely came from iPod, they refreshed it every 6-12 months with different colors, capacities and form factors.
  
• 2006-2009: MacBook was popular, it was updated it twice a year from 2006-2009. The Air received annual updates from 2008-2015.
  
• 2010-2014: iPad was hot, we saw a new model every year and a mini.

What's with the romantic belief that Steve Jobs was immune to this?

When Jobs left Apple in 2011, the company was selling 4 different types of iPods each with different capacities and colors.

 

[Razzerman]

As consumers, we have the option of voting with our wallets.

Yep, and I've seen nothing on the table from apple since Steve passed that has encouraged me to spend my hard-earned. iMac? No thanks, too restrictive. Miniature Mac Pro? Please... Mac Mini? No ta; dumbed and soldered down. I'll pass.

The only flicker of hope is the mMP. When they burger that up, it's hackingtosh time, I'm afraid

 

[roland.g]

I get what you are saying but not sure you are saying it right. Is all of Tim Cook’s activist leanings a ruse to hide the company’s greed?

Kidding aside, your harp on the iPhone weighted revenue. The iPhone is the Apple Halo effect bringing users to the Apple Watch, TV and to Macs. They sell most of these other items because of the iPhone. Without it the Apple Halo doesn’t grow. Go to an airport or coffee shop and see the volume of Apple notebooks out there. Yes it is a great product and more preferred by students, etc., but to a great degree the iPhone has boosted the attractiveness to the Apple laptop, or at the minimum decreased the aversion to its higher price point as compared to PCs.

This leads to the other and more important factor that you are missing which is the economics. People buy more cell phones, replace them due to damage and want more often than a computer, which both naturally leads to greater volume. More people have phones than people have computers.

And then there is price. The barrier to entry. A phone is inherently cheaper and easier to sell in volume due to price and barrier to entry, especially considering both Apple and the carriers incentivize purchasing through no interest financing. You do not get this with computers. No one is really selling a $1000-3000 computer for $50 or $100 or $200 a month. But it is so easy to buy a cellphone for $25-50 on your monthly cell bill. We’ve accepted it as part of life for the most part. A computer is a bigger decision.

All of these factors are going to undoubtedly skew revenue towards the iPhone.

I haven’t even mentioned advertising. Most commercials are what? Beverages (beer/alcohol/soda); insurance; cars; and wireless providers. The cell phone companies used to advertise coverage. Now most of their ads are for the new phones from Apple and Samsung.

 

[Falhófnir]

I think the biggest change has been in the upselling getting more agressive on product trees, look at the entry models of MBP, the 13” ntb has 128gb of storage, the 15” has 256gb of storage - for the amount you pay for each you’d expect 256 and 512 respectively - but that’s available at a relatively cheap 200 or so extra, basically an easy way for Apple to pocket a bit more without increasing the ‘starting at’ price even further. With the 15” pro they’ve gone even further eliminating the 1,999 model without a dGPU and only offering the 2,349 model with it, whether you want it or not.

Previously the entry models always felt like they were more adequate to me.

 

[mtneer]

The business of business - is business. I don't understand why people try to apply morality and ethics to a business. The officers of any company have a fiduciary duty to maximize shareholder profits under all legal means possible. If there's profits to be made by legally in some jurisdiction by torturing infants or something morally and ethically abhorrent - the officers are obliged to pursue it, or face shareholder lawsuits. Or they could resign and someone else take over with fewer qualms.

 

[Audit13]

Apple has moved prices and products upmarket to further distance themselves from their Dell-like and Samsung-like competitors. Apple isn't interested in the low-end and mid-end market because that's not where the big money is.

Apple practically has a captive market. Each year, I hear many people say they are leaving the Apple ecosystem because of the cost and then I see them and their kids outfitted with expensive Apple kit.

Me? I always head to the used market for replacement MacBooks before looking at Apple refurbs.

 

[theluggage]

80% on iPhone development and services
20% on EVERYTHING else.

Which isn't necessarily a problem: 20% of a lot is (hmm... lets see, multiply by 100, carry the 1...) still a lot.

The worry is the extent to which they're generating that huge growth in revenue by driving up prices on fairly stagnant numbers of unit sales - because that could be unsustainable. Both the phone and PC markets are reaching saturation, technical progress is slowing down, and suddenly 3,4,5 year old tech products still get the job done unless the maker forces obsolescence.

So far, Apple seem to have successfully persuaded people to pay 20% more for their phones and laptops - in the next year or two we find out whether those people will therefore keep them for longer. We might also find out how many times Apple can crank up prices before something gives.

Meanwhile, Apple still haven't come up with another miracle product to match the original iPad or iPhone. The Watch has been around for a few years now and - while it may not be a failure - still isn't going ballistic. Whatever they're doing with the Car still seems to be a long way from fruition - and the Tesla is already pretty much everything you'd imagine an "Apple Car" to be except profitable.

Seems to me that they're "riding the tiger" at the moment - the "reward" for 20% revenue growth this quarter is that the markets (which really don't think long-term) will expect 25% growth next quarter. That "trillion dollar" valuation is not money that anyone can spend - it is based entirely on what the markets "thought" the shares were worth this morning, and could literally evaporate overnight if the markets get spooked.

 

[turbineseaplane]

The best example of the Tim vs Steve Apple, as pointed out by Gruber this week (and last I think) is the iMac and SSD/HDD situations.

100%...if Steve were still around and running things, all Apple devices would be SSD only at this point, because they are simply, drastically, better. This matters for brand and experience and is a longer term play.

The only reason the HDD versions exist anymore is to price anchor at the bottom and drive/force upgrades. Nobody at Apple would tell you with a straight face that an HDD based device is "great" in 2018. Steve would have killed that off many years ago because he was simply more of a product guy.

Revenue and profit always matter, of course, but the bias towards amazing products isn't there in the same way anymore and it's easy to see with countless decisions over the last 5+ years.

 

[Ma2k5]

Complete hogwash, too much hugging onto Jobs’ nutsack.

Jobs could not be more profit driven if he wanted to be - and for good reason.

 

[turbineseaplane]

Complete hogwash, too much hugging onto Jobs’ nutsack.

Jobs could not be more profit driven if he wanted to be - and for good reason.

The exact types of things Apple is doing now, they almost never did under Jobs, at least not to my knowledge and recollection.

They bundled in things they thought customers would want/need or just be nice things to have to ensure a great experience. Apple appears to be actively finding features and niceties to strip out and then charge for now (nickel and diming).

 

[Lioness~]

Most people start businesses for profit. It's what motivates people/businesses for greatness.

The business that gets really great starts from a vision. Apple did too.
They continue however to want profit, because that’s survival.
But the difference between business with vision and business only for profit, Apple is an extremely good example. Because we know it as a company with vision, and we all payed gladly for its products.

Today people don’t seem that happy to pay for it, because there’s no vision there anymore.
Only vision left is profit on the products.
That’s the difference.

 

[turbineseaplane]

@Lioness~

Well said. The extreme of "raise ASP's and margins as much as possible" is simply going too far.

Nobody should be making the argument that "they're a business - they need to make money".
We get it. Not only are they a business, they're the most valuable one *ever*.

Everything has limits. Some regression from "profit at every single opportunity no matter how big or small" would be awfully nice.

With the logic of just do any/everything you can to make money, one could argue for strip mining the entire planet to make as much money as possible with no regard for anything else. It's capitalistic thinking that goes simply unhinged off the rails.

 

[Ma2k5]

The exact types of things Apple is doing now, they almost never did under Jobs, at least not to my knowledge and recollection.

They bundled in things they thought customers would want/need or just be nice things to have to ensure a great experience. Apple appears to be actively finding features and niceties to strip out and then charge for now (nickel and diming).

The very fact that Apple is so profitable actually proves what Tim Cook is doing is working even if you don’t like him. If people are buying his products, how can we criticise Apple? I don’t like a lot of Apple decisions and product choices, you just have to read my posts, but I can’t argue with numbers which represent the whole customer base, compared to just my own opinion.

You’ll know he’s doing a bad job when Apple goes the way of say Blackberry, Nokia, Yahoo etc

 

[turbineseaplane]

The very fact that Apple is so profitable actually proves what Tim Cook is doing is working even if you don’t like him. If people are buying his products, how can we criticise Apple?

Think about that statement a bit and really open it up...

There's a lot hidden to unpack with what you're saying and the implications.

 

[Pangalactic]

The very fact that Apple is so profitable actually proves what Tim Cook is doing is working even if you don’t like him. If people are buying his products, how can we criticise Apple? I don’t like a lot of Apple decisions and product choices, you just have to read my posts, but I can’t argue with numbers which represent the whole customer base, compared to just my own opinion.

You’ll know he’s doing a bad job when Apple goes the way of say Blackberry, Nokia, Yahoo etc

Yeah, this is exactly what this discussion is about. For example, let's take Microsoft, who used to be the top company in the world - and very profitable, no doubt about that. They also had a wonderful product called Interner Explorer, which initially was a pretty impressive browser. However, Microsoft completely neglected its development because - well, you know, not much profit to be made there. So it lost its share, and lost, and lost... suddenly 10 years later Microsoft decided it was an actually important product for them, went all out and captured around whole 2% of the market, where it is likely to remain for the foreseeable future.

That's the problem with profitability - it makes you neglect parts of the business that later come to bite you in the back with all the consumers you lose.