[Danieru]

$42.4 billion of revenue in total. $6 billion of which is services. That is not the profile of a services company. That is the profile of a company who's PR department is running distraction on the press.

You cannot replace the revenue of a once every two years $800 purchase with some music sales. Consummers only even spend that $800 because the cost is hidden in a larger monthly bill.

This should be a big deal. Apple is no longer taking market share from Android. Apple is no longer convincing consumers to replace their old iPhones. This is a trend which should scare investors. Let Apple is still priced assuming 11 more years of current profits.

[dottrap]

From the conference call:

Maestri: Services now account for 11% of Apple's overall revenue, up from 8% in the year-ago period.

Cook: Switchers from Android and other platforms accounted for the highest percentage of iPhone buyers than ever before.

[adventured]

That'd be an interesting data point, if iPhone sales hadn't collapsed by 15% in the quarter. As such it sounds like nothing but spin and entirely hollow.

[threeseed]

iPhone sales are supposed to collapse though.

The new iPhone is coming out in a few weeks.

[rtpg]

I think Apple has it's issues, but isn't this textbook Innovator's Dilemma? Newer vertical looks small compared to established vertical, thus dismissed.

$400 every two years (assuming 50% profit per phone!) is just $17/month. If Apple can convince you to pay for 2 or 3 of its services, then they're gold.

Where does the "11 years" comment come from though? How do you figure that?

[andruby]

If you're counting profit on the phone, you need to compare that to profit from the service.

I doubt they are running Apple Music with a 50% profit. Most services are probably being priced close to cost to gain market share.

[rtpg]

Yeah that's a good point. I don't really think these services are "at cost", though: isn't the whole point of this industry that marginal costs are super low?

[tmoullet]

I assume he means the P/E ratio which is 10.79 right now.

[huac]

I would hesitate to interpret a P/E ratio as the number of future years in which we'd expect constant profits (wrt now)

[mrfusion]

Why hesitate? Isn't that a good definition?

[tallanvor]

The problem with claiming that Apple wants to be a services company is that they've tied their services to Apple hardware. The only product you might use these days if you don't have Apple hardware is iTunes or Apple Music.

For Apple to become a services company, they're going to have to open up to other platforms. Otherwise they'll remain a hardware company with services that are designed to keep users locked into their ecosystem.

[portman]

Comcast's cable business generated $435/subscriber in the most recent quarter. That's $800 in two quarters let alone two years.

There is significant revenue opportunity in video. Apps are the new video. Music and iCloud are gravy. That's what the market is reacting to.

Maybe AAPL won't achieve it but you can't dismiss at as prima facie impossible.

[joezydeco]

So what happens when they become a car manufacturer?

That's a purchase that is a few orders of magnitude larger, and spaced out even farther than a smartphone cycle.