Apple is transitioning from product company to service giant

“An accounting decision by [Apple’s] management this past quarter indicates where the company is heading,” Vishesh Raisinghani writes for Seeking Alpha. “Apple plans to halt publishing unit sales figures and average selling prices for iPhones, Macs and its other product lines. In other words, everything physical will be lumped together.”
“I think it’s reasonable for investors to assume this move implies softer sales figures. However, I think the decision also indicates a paradigm shift in Apple’s fundamental business model,” Raisinghani writes. “I believe Tim Cook and his team are trying to transition the company away from Jobs’ vision of the ‘ultimate product company’ to an ‘efficient services provider’. I believe Apple has depleted its product pricing and unit growth potential and will have to squeeze out growth by selling more services to its installed base. At least until new products are developed.”
“If it were a standalone business, Apple’s services would be nearly as large as Facebook in terms of revenue. The division brought in $10 billion in this recent quarter and there’s no reason to believe it can’t beat $40 billion in annual revenue over the next twelve months. FB’s TTM revenue was $48 billion,” Raisinghani writes. “As a standalone company, Apple Services Inc. is probably worth $344.25 billion (all my estimates above combined). That’s a third of Apple’s market cap. About one-fourth of the company’s market cap is pure cash.”
Read more in the full article here.
MacDailyNews Take: The key phrase: “At least until new products are developed.”
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