Ask Siri to name the most successful company in the world and it might respond: Apple. In terms of profit, revenue, market capitalization, and consumer cachet, it certainly ranks right up there. The iPhone, in its ninth year and seventh generation, has been the company’s golden goose, although the aging product may be losing a little of its luster. In addition to the iPhone, other familiar Apple products and services include MacBook computers and iPad tablets, as well as iTunes, the App store, and Apple Music. Primarily a consumer-oriented company, Apple has inked alliances with IBM and Cisco Systems to deepen its penetration of the enterprise market. About 60% of revenue comes from outside the Americas.
Apple’s mobile phone, the iPhone, accounts for nearly two-thirds of sales, with its tablet, the iPad, generating another 10%. Its Mac computer lineup (including the iMac desktop of the MacBook laptop) and service offerings (including the iTunes Store, iCloud, and Apple Pay mobile payment) each contribute another 10% of revenue. Other products -- such as the Apple Watch and Apple TV -- are responsible for the remainder.
Apple’s products run on two operating systems. The mobile products are on iOS, now in its 10th generation, and the computers run on OS X. The company generally updates its operating systems once a year.
The company makes some of its products at facilities in Ireland and the US, but most manufacturing is handled by third party contractors, such as Hon Hai Precision Industry, operating in Asia.
The Americas market, which includes the US, accounts for 40% of Apple’s sales. Greater China and Europe each contribute about a quarter of revenue.
The company has nearly 500 Apple retail stores across the US, as well as in some 20 other countries; China and Canada are the largest retail store markets outside the US.
Sales and Marketing
Apple sells its products through its own retail stores and website, as well as through a direct sales force. In addition, the company distributes through indirect channels, such as third-party retailers, resellers, and cellular network carriers such as Verizon, AT&T, Sprint, and T-Mobile. Indirect channels account for some 75% of Apple's total revenue.
Apple had been on a remarkable run of increasing revenue and profit for the past decade or so, but it saw declines in both measures in fiscal 2016 (ended September). The company reported revenue that year of $215.6 billion, down 8% from the prior year. Its three top product lines (iPhone, iPad, and Mac) all decreased, but the company was particularly hit by an 8% drop in unit sales of the iPhone and a 12% drop in iPhone net sales. The results come amid a slowdown in the smartphone market in general (especially in China, which had been Apple's largest growth market) and a decline in interest in the iPhone particularly as customers wait for a more substantial redesign (possibly late in 2017 for the iPhone's 10th anniversary).
Net income was also down in fiscal 2016, falling nearly 15% to $46 billion, as a result of the reduced revenue, as well as Apple's continued investments in research and development. The company spent $10 billion in R&D that year, compared to some $8 billion in 2015 and $6 billion in 2014.
Following its customary practice, Apple introduced the latest model iPhones toward the end of its fourth quarter, priming them to benefit from holiday sales in what is the first quarter of its fiscal year. Sales of the iPhone 7 and iPhone 7 Plus buoyed the company's revenue and profit at the end of the calendar year. The always active Apple observer community is already looking forward to the next version of the iPhone in 2017, the 10th anniversary of the breakthrough product. The trick for Apple is to produce a combination of hardware and software that matches, if not surpasses, the imagination of its customers.
In recent releases other companies, notably Samsung, have caught up to (and in some features, surpassed) Apple’s technologies and design. Apple has disappointed some analysts by failing to deliver a new breakthrough product. (Although Samsung ran into problems of its own with the Samsung Galaxy Note 7 phone.) The Apple Watch has failed to produce blockbuster sales, though Apple has said sales are in line with expectations, and services like Apple Pay and Apple Music have not provided noticeable boosts to revenue. What's more, a new version of the MacBook Pro laptop computer introduced in late 2016 didn't provoke sizzling sales.
While China provided a big injection of revenue in 2015, sales there dropped 17% in 2016 in the face of stiffening competition. Apple has made investments in China, including in the country's dominant ride-share company, to cultivate the market. Apple executives have wooed officials in India in hopes that it can break into that enticing market. In 2016 Apple opened an office in Hyderabad that will focus on development of Maps for Apple products.
In an effort to reach the business market, Apple has developed partnerships with several big companies. Apple has worked with IBM, SAP, Cisco Systems, and Deloitte to develop business applications for Apple products. Demand from the enterprise market has bubbled up, somewhat, from employees wanting to use at work the Apple products they use at home. IBM has even embraced Apple products such at the Macbook Pro for its own workforce.
In some ways Apple’s strengths can be seen as weaknesses. The tight interlocking of software and hardware helps its devices work, but it frustrates users who would like to have access to more third party products including hardware. The company’s history of innovation has led analysts and customers to expect big products from Apple on a regular basis. They’re disappointed when it fails to deliver.
Apple became ensnarled in debates over national security and privacy in 2016 when it refused to help the FBI get access to information on a terrorist’s iPhone. The issue was resolved when authorities got the information without Apple’s help. In another regulatory battle, the European Union officials ruled that Apple owed some $14 billion in back taxes to Ireland. Apple said it would fight the ruling, but the issue is indicative of Europe’s stronger stance against American technology companies.