Once upon a time, Apple was a hardware company that also maintained a software and media ecosystem since it helped drive purchases of Macs, iPods and more. But over the years, the software and services side of the business has become increasingly important, and CEO Tim Cook even went so far as to state out right that Apple is “not a hardware company.” Not once, but twice.
He emphasized last quarter’s revenue from software and services to make his point. Apple made $3.75 billion in revenue from software and services, including sales of Apple apps, iTunes music, subscription service revenues and more. While he said it’s often overlooked as a component of Apple’s overall revenue picture, he also noted that compared to most companies doing software and services exclusively, it’s an incredible number.
“Because we’re not a hardware company,” Cook said, “there are other things we are doing and could do to have revenue and have profit flow.” The sale of an Apple device to a customer isn’t the end of a relationship, Cook emphasized, but the beginning, and there are all kinds of elements of the business, including retail, designed to capitalize on that fact.
There are challenges for Apple on the software and services side of the equation before it can truly hold it up as a primary selling point. iCloud has had many growing pains over the years, as it transitioned from MobileMe and .mac before that. And users still often report issues with iMessage, iTunes Match and other cloud-based offerings that tie Apple’s software offerings together. And let’s not forget about Maps. But as Cook noted, there is a new executive structure in place which includes devoting trusted resources like Jonny Ive to the software side of the company, which could help it expand this increasingly important part of its business.