10 Reasons the iPhone Could Eventually Hurt Apple's Business

 
 
By Don Reisinger  |  Posted 2011-04-21 Email Print this article Print
 
 
 
 
 
 
 

News Analysis: Apple's iPhone is wildly popular and easily leading the company's business. But future missteps or an unforeseen downturn in iPhone sales could dramatically alter Apple's business.

Once again, Apple's earnings impressed the market. In its fiscal second quarter, Apple generated a whopping $24.67 billion in revenue and a profit of nearly $6 billion. As one might expect, investors, analysts and Apple fans were excited by the news. It effectively highlighted just how far the firm has come since the mid-1990s.

In addition, Apple announced that it sold over 18 million iPhones during the quarter, along with nearly 5 million iPads.

But there is much more to the story than just Apple's ability to generate continued interest in its devices. The iPhone especially is more important to its operation than ever before. And going forward, it will continue to be integral to its ability to generate record-breaking revenue and profits.

However, all that importance could spell trouble for Apple. Sure, the smartphone is doing well now, and for the foreseeable future, that will continue. But what if the iPhone starts to decline due to issues or slumping demand?

The iPhone's success could become a curse. Unlike all the other products Apple sells, the iPhone could significantly affect the company's business if issues arise.

Read on to find out why:

1. It's now half of its business.

Based on the data Apple provided in its second-quarter results, the iPhone represents half the company's revenue. Two years ago, that figure stood at approximately 18 percent. Considering all the products Apple sells, including the Mac, the iPad and the iPod, among others, having a single device representing half its operation is a risk. While things are good, the financial performance will skyrocket. But if things turn sour in the smartphone market for Apple, expect its revenue figures (and thus, its profit) to slide at a tremendous rate.

2. It's the driving force behind the App Store.

Apple's App Store is wildly important to the company right now. It's not necessarily a main revenue driver, but with over 10 billion application downloads, it's a place that Apple can continue to capitalize on over the coming years. Right now, the iPhone is the main driver behind the App Store, followed by the iPad. If trouble arises with Apple's iPhone in the future, the App Store, in turn, might falter, as well. The last thing Apple needs is to see not one, but two of its important operations decline at the hands of the iPhone.

3. Android keeps getting more popular.

Apple's iPhone is not competing in a vacuum. Right now, Google's Android platform is capturing more and more market share around the world as consumers opt for an increasing number of devices running that operating system. As Android's star continues to rise, the iPhone might be negatively affected. If that happens, Apple will need to find a way to maintain the iPhone's position in the marketplace, or it could find itself in a difficult financial situation. Android is a bigger threat to Apple's business than many believe.

4. The iPad isn't enough

Look at Apple's product line and try to find another device that's even close to as important to its operation. Some might say that the iPad is, but that market is still quite young and with so many competitors leaping into that space, it's doubtful that as many consumers will opt for Apple's tablet the way they have jumped for its smartphone. Until Apple can improve sales on its other products to a point where they would be just as important as the iPhone, it's easy to see that poor performance from the company's smartphone could prove extremely troublesome to its business.



 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 
 

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