Apple is likely to offer Mac, iPad, and Apple Watch hardware subscriptions which will significantly increase Apple’s revenue and earnings, Loup Ventures‘ Gene Munster and David Stokman predict.
Gene Munster and David Stokman for Loup Ventures:
Similar to the iPhone upgrade program, we believe, over time, Apple’s delightful hardware trade-in experience for Mac, iPad, and Watch will evolve into hardware subscription offerings for these devices. Eventually, we envision the company merging its services offerings, alongside hardware subscriptions, to create a 360° bundle. Think of this as paying a monthly fee to Apple for most of your tech needs…
Apple is the only company that can make this work, given their service and maintenance logistics, along with seamless hardware and software integration.
Today, about 55% of the company’s revenue can be purchased as a subscription. By adding Mac, iPad, and Watch subscriptions, that number will approach 85%. This dynamic will increase Apple’s revenue and earnings visibility which should, in turn, expand their earnings multiple. Our $200 price objective is based on 35x our 2022 EPS estimate of $5.70…
We believe Mac and iPad growth rates will stabilize around 10% over the next few years, representing a step up from flattish growth pre-pandemic.
MacDailyNews Take: The Wall Street Journal‘s Christopher Mims and analyst Horace Dediu back in February 2018 concurred:
Contrary to popular belief, Apple Inc. isn’t a hardware company. Nor is it a software company. Apple is, fundamentally, an ecosystem company… The trouble is, as Apple increasingly emphasizes device prices over volumes for revenue gains, it confronts a fundamental tension—between charging people more for hardware and, simultaneously, more for services to access through it. The former puts profit margins ahead of prevalence, while the latter emphasizes maximizing the number of gadgets in customers’ hands.
Services, and the millions of developers and thousands of companies behind them, are the reason the iPhone is so sticky, says Horace Dediu, an Apple analyst and fellow at the Clayton Christensen Institute for Disruptive Innovation. One way for Apple to resolve the hardware-versus-services tension would be to roll them into one giant subscription, Mr. Dediu says.
Imagine a service where you simply subscribe to a regularly updated iPhone, Apple Watch, AirPods or some subset of these devices. Throw health monitoring, an iCloud subscription, Apple Music, Apple’s original programming and more into a cable TV-like bundle, or a la carte, and Apple could go from being a hit-driven company to one that throws off predictable, consistent, subscription-based revenue. Think of it as Apple Prime.
Stupid the country (world) is already up to its neck in debt.
Our system, worldwide, is based entirely on debt. No one anywhere uses real money for anything. Just IOU’s called dollars or pounds or whatever. Government debt documents we get as paychecks to exchange for goods and services.
I will never lease computer hardware again. Never.
I did that back in the 80s for several systems, it was a total nightmare.
IF Apple were to ever move to a subscription model for everything (hardware, software, services) then after 42+ years of being a very loyal Apple user I’d have to leave Apple’s fold.
Similar to the iPhone, I’m sure it would just be an option.
Calm yourself!
It’s just an option. But you know that. So why you bitching for nothing?
I still resent that I could no longer find any methods to keep using my previous, unsupported Photoshop apps for which I paid a one time fee from running on new Apple hardware and OS. I now pay that exploitative monthly rent.
In pre-technological society, the farmer milked the cow when needed, and who perhaps knew it by name; Now the farmer’s database largely controls the milking, thus losing touch with the animal who is now being exploited and over milked and lives and is raised in “inanimal” (as in inhumane for humans) conditions.
That is Adobe and Apple is following along.
Jobs famously called out Adobe for being lazy. I think Adobe is a big fat turd that can’t help making some good but non-innovative products. I hope that Apple does not take this lazy route to automatically milk its kept cows. So Apple should keep subscriptions optional. Apple should honor unsubscripted products and services just as a farmer should honor free-range cows.
Great illustration.
“Lazy” is a fitting word for the subscription market. I think it makes the producer and the subscriber lazy. I can go for weeks w/o “milking” my Netflix ‘script and their service hasn’t changed a bit over the decade+ of being one of their heifers…and there are changes/additions I would have made to add quality/features.
I’ll guess cows don’t feel like they’re being “used,” but that’s exactly how this udder feels when faced with this corporate abstractor method and unfortunately, Apple is attempting to affix it at every opportunity. MOOO.
And to my analyst friend:
Horace, no…the “stickiness” of the ecosystem has to do with function, dependability and security. I don’t need, nor want to be fettered with a subscription that cha-chings in the background for all the supposed life-critical Apple sustenance that I may, or may not use in a billing period. And Apple, no…I’m not here to support the company’s stock price for a better Wall St appearance. I thought you are here to bring services and products that delight? Please do your best to bring and keep that relationship back into proportion.