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How Apple is Preparing for Life After the iPhone [No, not Buying Netflix With the $250 Billion Cash Pile]

Last Updated September 23, 2020 12:26 PM
Mark Emem
Last Updated September 23, 2020 12:26 PM

With the iPhone contributing more than 60% of Apple’s sales, it will be hard to replace it with another blockbuster product to compensate for the dwindling sales of the iconic gadget. But the iPhone maker has every intention of filling that void.

Towards this end, according to The Wall Street Journal , the tech giant is making leadership changes and reordering priorities. One of the most prominent leadership changes that Apple CEO Tim Cook recently announced was the replacement of the retail chief Angela Ahrendts with human resources head, Deirdre O’Brien, as CCN.com reported.

Earlier this month, the vice president of Apple’s voice assistant Bill Stasior was also pushed out. Siri has long been criticized for being inferior to rival offerings such as Amazon’s Alexa, Microsoft’s Cortana and Google Assistant.

For Apple, Services are the Future

One of the most promising areas of future growth for Apple is services. Last year, Morgan Stanley indicated that this segment would contribute 62% of the revenue growth between 2017 and 2022. The iPhone’s contribution to revenue growth during this period will be 18%. On a trailing 5-year basis, services had been contributing just 23% of the revenue growth. The iPhone had been responsible for 86% of the revenue growth on a trailing 5-year basis.

Apple Revenue Growth by Segment. Source: Morgan Stanley

This revenue growth in services will be achieved by increasing paid subscriptions. Currently, Apple boasts of 360 million subscriptions and intends to increase this to above 500 million.

The iPhone maker also intends to increase the services on offer with video being seen as potentially lucrative. The tech giant will reportedly splash over $1 billion on creating original video content. Leading Apple’s video programming efforts are ex-Sony Pictures Television co-presidents, Jamie Erlicht and Zack Van Amburg.

Netflix Still not on Apple’s Shopping List. Yet.

Despite the tech giant’s burgeoning cash pile, its post-iPhone plans do not include making a jaw-dropping acquisition. With Apple’s video ambitions well known, the media has recently been full of reports goading the iPhone maker to acquire Netflix.

As Netflix’s market capitalization is under $160 billion, Apple could acquire the streaming giant and still not deplete its cash reserves. This fixation with the iPhone maker buying Netflix has become so pervasive to the point of being farcical.

Wedbush Securities’ equity research managing director, Daniel Ives, even recently stated that not acquiring Netflix was a strategic misstep on Cook’s part. Speaking to CNBC , Ives said:

In my opinion, the biggest strategic mistake Apple has made since Cook took over is not buying Netflix. That was the deal that they needed to do because it comes down to content.

Apple Still Got Your Back, Lovers of Macs, iPhones and iPads

The tech giant’s services business and its hardware feed off each other. So despite the slowing growth in the hardware segment, Apple cannot afford to neglect one part of the ecosystem.

According to CNBC , renowned Apple analyst Ming-Chi Kuo has projected that the tech giant will release improved hardware this year. This will include laptops, desktops, iPads and new iPhones with new display sizes and features. Kuo also expects wireless charging for the AirPods to be introduced.