I wrote the first SWOT analysis on Apple back in 2012, since then 32,000+ of you have read it making it one of my more popular posts. I admit, it’s fun even for me to go back and read it to see what has changed. Many of you are college students and I do enjoy your emails. If you appreciate the update, please leave a comment, share it on Reddit or give the website a citation in your paper. Today, I had time to watch Apple’s World Wide Developers Conference (#WWDC15) keynote today and thought this would be a good time to update my Apple SWOT analysis.
Apple appears stronger than ever, iPhone & Mac sales are up and an impressive list of opportunities lie ahead with the Apple Watch, Apple TV, CarPlay, HomeKit and HealthKit. I hope you enjoy the update.
Apple Inc. designs, manufactures, and markets personal computers, mobile communication devices, digital music, video players and wearable smart devices. The company also sells various related software, services, peripherals, and networking solutions.
The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells various third-party Macintosh, iPhone, iPad, Apple TV, Apple Watch and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store, Apple App Store and Apple Watch App Store. Apple also has a number of subscription services, namely iCloud Backup Storage, Apple Music Streaming and Apple iMatch for music backup and multi-device playback.
The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of March 28, 2015, Apple had a total 453 retail stores, worldwide. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.
- Apple is an innovator and technology leader.
- Strong cash position, $160 billion in long term marketable securities and only $40 billion in long term debt.
- Excellent EBITDA of $72.3 Billion on revenue of 212.2 Billion. (34% Net Profit)
- Excellent brand loyalty by its customers. Many own multiple products (Mac, iPhone, iPad, Watch, etc.) Apple’s first time customers, buying iPhone and iPads are buying other Apple products, including Apple’s Mac line which surpassed iPad sales in Q1-2015, and generaed $5.6 billion in revenue.
- Apple App Store is an excellent source of revenue from the sale of applications written for iOS.
- Apple iTunes Online Store is an excellent source of revenue derived from sales of music and movies to be played on iOS devices.
- Apple iCloud storage and backup services provide for a predictable recurring revenue stream.
- Excellent Research & Development division that is able to deliver (premium) products that customers will stand in line to buy.
- Global reach, Apple’s brand is strong around the globe, including China with Q2-2015 revenue of $16.4 billion in sales, a 70% increase from Q2-2014.
- Apple owns their Operating System (iOS), which is used across their entire product line allowing them to sell a complete product without paying large royalty payments to their competitors.
- The recently released Apple Watch is estimated to reach 36 million units sold in its first 12 months (Morgan Stanley).
- Apple AppStore reached over 100 billion downloads in June 2015. Over 1.5 million apps are available.
- Consumers like bigger phone screen sizes, sales for iPhone 6 and iPhone 6 Plus have eaten into Samsung’s market share.
- Premium Pricing continues to drive away price conscience buyers, including Millennials. Price sensitive consumers tend to not consider Apple in buying decisions.
- iPad users are holding on their existing iPad’s, not upgrading as often resulting in a decline in new iPad sales. Apple sold 12.62 million iPads in Q2-2015, down 23% year-over-year, which translates to roughly $5.43 billion in sales.
- Security concerns. Hackers we’re able to gain access to celebrity phones via iCloud. Apple’s customers are see an increase in phishing attacks as hackers spend more time focusing on Apple’s security weaknesses.
- Patent infringements, Apple was ordered to pay $533 million to Smartflash LLC for infringing on three patents found in iTunes.
- As smartphones continue on their journey to become a commodity, companies like Samsung will continue to apply pricing pressure. Apple tends to lead innovation and then watch other companies control the market once it has reached the tipping point and wider consumer adoption.
- New product introductions are massive and challenge the supply-chain. Tim Cook told Charlie Rose, “We had an intense team working on Apple Watch for 3 years”. Add the fact any new release must be able to respond to demand in the millions of units. Apple can not release a new product from idea to delivery in 12-months, like startups, simply because the fan base is massive, therefore new products are a multi-year effort.
- $212 billion in annual revenue, it takes a big product, or a new recurring subscription service to move the needed. A new or existing product with annual sales under $1 billion is simply no longer material to the company. Therefore, it will likely miss product introductions that can pivot to become billion dollar products, requiring them to acquire companies later in the M&A cycle.
- Apple Music, introduced June 2015, adds a 24/7 global radio station, fan community ecosystem and music service. The new service will cost between $9.99 to $14.99/month. These recurring revenue opportunities have the ability to add significant revenue if consumers adopt them.
- Apple Watch, introduced April 2015 is just six weeks old, though sales figures haven’t been disclosed, some experts predict 30 million watches could be sold in 2015. Apple’s Watch OS will have a major update in Sept 2015 as Apple watchOS.
- Apps for Apple Watch will become a major revenue source, 3,500 apps have been created for the Apple Watch in the first 6 weeks, that number will continue to grow, providing Apple will a consistent revenue stream from App sales and inApp purchases.
- Apple HomeKit, moving to iCloud with advance security features, HomeKit will help you manage lights, locks, security systems, motion sensors, fire and carbon dioxide monitors, window shades and garage door openers. This will drive additional license revenue.
- Apple HealthKit, more integration into Apple watchOS, providing additional app sales. This technology is still very early, in five years it will be amazing to see how HealthKit is adopted by health care professionals and in-turn drive more Apple Watch sales.
- Apple TV, required for Apple’s HomeKit, is likely one of biggest opportunities for Apple to control the home theater experience. The opportunities for an AppStore for Apple TV should not be overlooked.
- Gaining access to cable TV cord cutters. Apple TV supports HBO NOW, HBO’s subscription service that does not require a cable subscription. It’s just a matter of time before content providers give consumers the opportunity to watch any channel via Apple TV. In order to pull this off, Apple will need to invest in license deals and a new interface to make it easier to find content, and less about going in and out of apps.
- Apple CarPlay, still very new, huge license opportunity for Apple.
- MacBook sales continue to gain traction, over 4.6 Macs were sold in Q2-2015, up 10% over Q2-2014.
- ApplePay is gaining traction and provides a new recurring revenue stream for every transaction it processes.
- Microsoft release new native apps for Microsoft Office making the iPad even more business enterprise friendly and a top choice to Fortune 500 executives. Apple continues to increase adoption in the enterprise, previously owned by Dell & IBM.
- Cross product sales will continue to increase as more and more people buy into the Apple ecosystem.
- Product development cycles have shortened in the mobile phone market, giving Apple a bigger opportunity in upgrade sales. Excellent iPhone 6 sales reinforces consumers are willing to update their phone hardware every two years.
- Apple’s direct online sales channel will continue to grow, helping improve their already impressive gross margins. The Apple Watch was been sold direct allowing Apple to cut retailers out of the launch revenues.
- Larger screen size on the iPhone 6 Plus could hurt iPad sales.
- iPod sales continue to evaporate, commissions on music purchases will likely decline further as more consumers rent vs buy.
- Mobile Phones based on Google’s Android Operating System continue to be a formidable competitor.
- Mobile Phones based on Microsoft’s new Windows 10 Operating system could eat into Apple’s market share.
- Cheaper laptop computers from Dell, Toshiba, HP, Sony and IBM and a low cost Windows 10 OS to OEMs will continue to add pricing pressure on Macs.
- Pandora, Amazon Music and other streaming music systems will continue to make it less attractive for consumers to actually buy music or subscribe to Apple Music.
- Technology moves quickly, new threats from startups are likely.
I would like to hear from you. Go on record now with your own predictions, use the comment below (on my blog) and we’ll see how we did in a year or so.
Click this link if you would like to read my March 2012 Apple SWOT analysis.
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