Apple needs to focus on something other than the number of devices sold to maintain growth.
M&A advisory firm Magister Advisor managing director Victor Basta said the results of Apple, Samsung and Nokia last week emphasised the argument that the mobile market was no longer about the device.
The company needed to get to a place where it didn’t matter how many devices it sold, since the amount of profit that could be made out of smartphones would plateau and then contract.
“Apple needs to get to a place where its most interesting announcements are not about new devices. It must grow its revenues from software and services. ”
That saturation word again
Saturation of the device market would have a huge effect on BlackBerry maker Research In Motion, Nokia, whose results last week showed a slow climb back into the black following drops in profit and revenue, and other device manufacturers, Mr Basta said.
“By chasing volumes, they will inevitably go the way of Dell which has itself been frantically replacing declining revenue by driving greater volumes.”
There were “significant pressures” faced by hardware-focused businesses as the device market headed towards saturation, the company said, and margin pressures highlighted in the results announced last week had underpinned this. Samsung’s reports were likely to be the peak of a wave, the company said.
Software and services
Software and services were Apple’s best way to achieve growth, he said, since it had hundreds of millions of credit card enabled subscribers through iTunes and the App Store.
“Apple arguably owns and controls the whole app concept and is the micropayments king.”
The company’s revenues from content sales was growing faster than total revenues, Mr Basta said, and this trend was expected to accelerate.
Mr Basta said how the company transitioned from an emphasis on hardware, to software, was at least as important as the fabled Apple TV, and much more so in the long term. Devices were fast becoming irrelevant and would continue to move towards zero profit and beyond, he said. As competition across the industry intensified, Magister predicted that devices would be sold at a loss or potentially given away to entice content sales, Mr Basta said.
“Fundamentally Apple needs to get to a place where it doesn’t matter whether they sell 50 million devices or five.”
Last week, Ovum principal analyst Tony Cripps told What Mobile that were Apple to release a budget iPhone, it would be at the point where the company realised the market had reached saturation and that there did appear to be a possible peaking in shipments.
