Ten years ago, Apple’s former CEO Steve Jobs unveiled the first iPhone to the world, changing the trajectory of the company for the next decade and completely revolutionizing the cell phone industry in the process. Thanks to this innovation, Apple has made billions of dollars in revenue. However, the iPhone’s success has been a double-edged sword for the company, as it is very challenging for any company to rely so heavily on one individual product. Many analysts believe that as the iPhone becomes less popular, so does the company.
It is important to note that the iPhone still has major success in the cell phone market, and that does not appear to be changing any time soon. According to the most recent reports, the iPhone 7 beat last year’s all-time unit sales record by a few million, and revenue growth was up by 4.7 percent. Consequently, as seen in the graph below, for the last quarter iPhone revenue is nearly 70 percent of Apple’s earnings. As shown, the company’s financial results are heavily dependent on strong iPhone sales. This figure does not even include sales from iTunes, the App Store, and Other Products (cases, headphones, etc.) that are major complimentary goods to the Apple iPhone. The revenue dominance raises the stakes for new CEO Tim Cook to keep the company’s (main revenue contributor) marquee handset a top seller.
Last year, the iPhone also received its first decline in sales since it was introduced. Steve Jobs’ successor, Tim Cook is feeling the heat (already receiving a pay cut) as a result. Tim Cook is not as visionary a CEO as Steve Jobs, who transformed Apple from a niche computer company into one of the most profitable companies in the world. Between 2001 to 2008, Jobs reinvented Apple products three times, and each transformation—centering around the iPod and iTunes in 2001, the iPhone in 2007, and the App Store in 2008—drove revenue and profits to new heights. Yet in five years the only truly new product that’s managed to ship is the Apple Watch.
The iPhone alone generated $102 billion in sales in Apple’s last fiscal year, more than Google, Facebook, and Twitter’s annual revenue combined, and it appears to be going nowhere any time soon. Nevertheless, the question still remains: how long can Cook and Apple maintain the exceptionally high product demand of the iPhone before a new innovation takes control of the market? And will Apple be the company with the next great innovation or will another company rise and take over the market?