Apple's Newest Diversification: Business Essentials
Monday, November 22, 2021
Much like your own investment portfolio, companies continually must diversify to negate the ebbs and flows of their business segments. Up until 2001, Apple, then still called Apple Computer, was primarily a hardware company. The iPod was released and forever changed how the music industry conducted business. In 2007, Apple then released the iPhone, knowing it would cannibalize it's own iPod dominance in the market Followed by the inclusion of the App Store, then eventually iPads would see the light of day, all while still selling their signature computers to "prosumers".
As Apple continued to reinvent itself every few years, the stock grew from a split-adjusted $0.31 per share to around an all-time high of $157 earlier this year. Most forget the 4:1 split back in August of 2020, only its 5th in history. Flooding the market with product all paid off for the company as supply chain expert and now CEO Tim Cook, knew exactly how much product to create and how to vertically integrate the stack of hardware and software.
Late Summer, Apple released the newest iPhone 13. For the first time in a long time, several Apple fans chose to pass on the latest edition due in large part to the iterations becoming anemic. Slowly over the years, Apple has transformed itself from over-relying on the iPhone from 70 percent of revenues in 2015, to just about 50 percent today. For that, we can thank the M1 MacBook series, the Apple Watch, AirPods, and other various hardware. The one segment that we overlook for Apple's diversification strategy moving forward is its software.
In comparison to iPhone, iPad and Mac, Apple’s services revenue has increased year-on-year. Some analysts see it as the most important segment of the company, potentially reaching $50 billion in profit by 2025.
Business of Apps
Apple's software services such as AppleTV+, iCloud, Apple Arcade, Apple Fitness+ and more, are all a supplement to those that Apple has captured in the past 20 years into its ecosystem. This is where the next generation of revenue and diversification comes from.
Last week, the company announced a new service aimed at small and medium sized business that are a total part of the ecosystem, where the customers use Macs, iPhones, and iPads to conduct business upon, called "Apple Business Essentials". The service begins at $2.99 per device per month. It's designed to be a supercharged AppleCare, per say, where the business owner or IT department can keep tabs on each Apple device for employees.
Apple Business Essentials allows users to control what Apps and settings are available on each of the employee's devices. An added bonus will be additional iCloud storage included with each subscription: 2TB on the highest-end tiers. By no means is this revolutionary, but it is one more step towards cementing the diversification of Apple's services business.
Apple Business Essentials is a free app to get the apps and support you need from your company, all in one place. The Essentials app is automatically installed when you sign in with your Managed Apple ID that’s enrolled in Apple Business Essentials device management.
Apple Support
Microsoft's Office 365, and Google's Google One also have entry level business products that have the added benefit of increased cloud storage. As storage becomes less expensive as more servers are built worldwide, this will be a basic add-on product to most SaaS products as the cost becomes negligible to software companies.
Business Essentials is available as an App for iOS, iPad OS, and macOS, now in beta and expected to be generally available in early 2022. Unlike Microsoft, Apple has yet to make headways into the business community with an array of SaaS services. This move, while a small encroachment, may signal a significant move for Apple to provide ecosystem services to its customers to create lock-in, to fuel continual hardware sales Apple strives to maintain its lofty quarterly earnings reports.