Steve Jobs, services, and the tail wagging the dog

Dana Blankenhorn, Yahoo! Finance:

Apple is expected to have revenue of $50.94 billion for the September quarter, which is the fourth quarter of its fiscal year, and earnings of $1.86 per share. Margins are expected to be 38%.

Without revenue from services that would not be possible.

Dana is making the case that Apple is morphing into a services company.

More from the article:

The man behind Apple’s retail stores, George Blankenship, says services are also the future of the shopping mall. In his opinion, easy shopping, fast WiFi, and delivery services will make shopping centers relevant for millennials and their Generation Z siblings, and I believe him.

Because Apple owns its own cloud data centers, it can earn maximum margins from this trend. Instead of renting the space it uses for services, it owns the space, with all the tax benefits. Steve Jobs dismissed services as the tail wagging the dog. For Tim Cook, this is the dog.

I find this fascinating. For Steve, the product is the dog, the Mac, iPhone, iPad, and Apple Watch, collectively, is the dog. The services are the tail.

Is Apple truly becoming a services company? Is this inevitable, the only way Apple can maintain its momentum, size, and revenue stream?

  • Horace Dediu, @asymco, has been writing about the rise and importance of Apple services for a long time.

    • Dave Mark

      Big fan of Horace, smart, smart, smart! But this feels more like a tipping point, making the point that Apple is becoming a services company, the tail wagging the dog, with product becoming almost an afterthought.

      — Dave

      • Here’s HD in 2012 talking about another tipping point. Respectfully, I find HD’s observations about the importance of all three aspects of Apple’s business are as accurate today as they were five years ago:

        “Apple is the most valuable company in technology (and indeed in the world) because it integrates hardware, software and services. It’s the first, and only, company to do all these three well in service of jobs that the vast majority of consumers want done.”

  • Glaurung-Quena

    “Is this inevitable, the only way Apple can maintain its momentum, size, and revenue stream?”

    Apple cannot maintain its momentum. There aren’t enough people on the planet with incomes high enough to afford their products for them to continue growing the way they have been. This demographic fact clashes with the irrational demands of Apple’s investors, who expect growth to go on forever, and get upset if growth fails to continue at the same or higher rate as in the past.

    Services and bragging about the growth of services is simply Apple’s way of placating the stupidity of wall street. Apple will always be a hardware company first, as their services are all tied to Apple devices, and I doubt they are interested in changing that.

  • CapnVan

    Isn’t it arguable that this is an organic evolution?

    In Steve’s day, both with intro of Macintosh, and then iMac, iPod, (and most importantly) iPhone, the largest part of the problem was that the hardware (and software stack) sucked.

    DOS sucked. Internet connectivity sucked. MP3 players sucked. Smartphones sucked.

    Today, essentially, all of Steve’s big moves have become the standard landscape: Every phone basically looks like an iPhone. Every laptop looks like a MacBook.

    Arguably, Steve won the hardware wars. But those wars were only about the best way to deliver and develop content (which includes “services”).

    The war’s different now.

  • franksspam

    I found it odd that they called him, “The man behind Apple’s retail stores”. He was the real estate guy. He didn’t design them from a sales perspective at all.