After Apple's guidance revision, time to focus on enterprise

Apple's surprising announcement that earnings this quarter will come in less than expected highlight the company's need to expand in other areas. Beyond services, it should continue to push into the workplace.

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IDG

To say Apple's statement to investors revising its quarterly guidance got a lot of attention in the tech industry would be an understatement. The statement, which largely focused on iPhone sales in China as a major reason for missing revenue expectations by billions of dollars, quickly became one of the bigger tech and business stories of the new year.

A lot of the discussion in the last few days has focused on the fact that Apple can no longer rely on sales in China to fuel continued iPhone growth — and raised questions about whether the world has reached an iPhone saturation point. Among the solutions talked up were calls for Apple to refashion itself as a services company rather than a hardware maker. (There were, of course, renewed complaints that Apple's hardware pricing has gotten out of hand.)

It's hard to dispute many of these arguments, even though smartphone adoption over the past decade or so made meteoric growth unsustainable for Apple (or any other company). Without new geographic markets to enter, Apple to maintain sales growth will find itself ever more dependent on customers upgrading their devices or on Android users deciding to switch to the iPhone. The fact that people are upgrading their phones at a slower rate, and increasingly keep devices beyond the historic two-year upgrade cycle, were cited among the reasons for the restatement.

Although Apple may not have geographic markets to push into as it has for the past decade, that doesn't mean the company is without potential new markets.

The enterprise market has been a growing one for Apple for some time, particularly during the past couple of years; companies like IBM and SAP have demonstrated that mass deployment of Apple hardware on a great scale is not only possible but also beneficial.

IBM, which last fall open-sourced its Mac@IBM program, has been a leader in Apple enterprise adoption and has noted that it spends significantly less on support and maintenance costs for Apple-using employees than on those that continue to work on Windows PCs. The company is also one of several enterprise partners Apple has teamed up with in recent years, working with customers to develop business and enterprise apps for Apple devices.

The enterprise market is one of the biggest global technology markets on earth and while Apple has developed a strong foothold in it, there is still plenty of growth to be had. Grabbing a larger share of that growth could offset the impact of a "peak-iPhone" world. Would it offer the same device sales or revenues as a market as large as China? Not likely, but it is also a more sustainable market.

One thing to consider about the enterprise market is that it isn't just about the iPhone. In fact, for Apple, that playing field is probably more ripe for sales of new iPad Pro tablets and MacBooks than it is for iPhones. These are all products that expand Apple's sales beyond just the iPhone.

Apple iPad Pro (3rd Generation) / art / sketch Apple

One of the challenges Apple faces in the consumer PC and tablet markets is that it makes premium devices with premium prices. Many users opt for lower cost, bare-bones computers, tablets, or two-in-one devices. Businesses typically don't. Most business salespeople will note that pricier, better-powered PCs are standard fare for companies 1) because of their longer lifespan and 2) because of performance, maintenance and repair rates. In general, upgraded business PCs — particularly notebooks — aren't much cheaper than Apple's hardware. And IT buyers are more likely to pay attention to things like total cost of ownership over a device's lifespan than consumers that focus on just the upfront costs.

For Apple, this represents a great opportunity. There are growing proofs of concept that Apple devices function well in the enterprise, deliver on employee satisfaction, and have lower overall ownership costs. Apple's premium design and reputation also make offering a Mac or an iPad a potential recruitment incentive. In today's job market, that's a fact that shouldn't be ignored.

The main point here is that Apple needs to invest more in its enterprise mindshare and needs to define itself as a company that makes products beyond the iPhone. Doing so would likely allow Apple to avoid future earnings warnings and the resulting market shocks that come with them.

Copyright © 2019 IDG Communications, Inc.

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