Apple: Trillion-dollar revenue is just around the corner

[Editor's note] What kind of efforts does a business need to make if it wants to achieve $1 trillion in revenue ? For most businesses, this is nearly impossible to achieve. But the author of this article believes that Apple may achieve this goal, and analyzes the possible ways, let's take a look.

Original link: https://www.profgalloway.com/apple-thief/

Translator | Zhang Yuming Editor | Tu Min

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Sometimes, looking at the whole has no fixed meaning because it is the result of the efforts of all parties. But overall success also provides a benchmark, a way for us to focus on the overall effect. Over the past few years in the tech space, we have seen several companies cross the $1 trillion market cap, some hit $2 trillion, and one approached $3 trillion.

Let's set an even bolder target: $1 trillion in revenue. We still have several years to achieve this goal. Walmart, the company by revenue today, brought in $559 billion last fiscal year. While market capitalization can fluctuate by more than 20% in minutes, revenue is closer to the core of stakeholder value as it represents the benchmark for actual business. The British call income "turnover", which means someone is doing the actual work.

The great "robbery"

$1 trillion in revenue cannot be generated in a single category. Few categories offer a $1 trillion market, and dominance in any category creates problems. Having a 20% share in all five markets is better than having a 100% share in one market. Diversity provides security, while monopoly raises legal concerns. The combined dominance of Facebook and Google in digital advertising makes it easier to comply with antitrust legal frameworks.

1 trillion in revenue means taking the market from the incumbents. This isn't new among big tech companies. Amazon is jumping headfirst into cloud computing, Microsoft is eroding gaming, and over the next decade we'll see "The Big Heist: The $1 Trillion Edition." There is one company most likely to sit on the Iron Throne of theft.

six-shot shooter

Apple's sidearm is a thermonuclear device. Every bullet is an unparalleled asset.

Familiar operating system . For the richest billion people on the planet, iOS is the operating system of their lives. They don't want to learn a second language when they see a "smart" TV, home, car or retail store.

core product . The iPhone, the most successful consumer product in history, is the center of technology. The phone contains speakers and microphones, a barometer, an accelerometer, a proximity sensor, an ambient light sensor, a gyroscope, and four cameras. It connects to a network of interface devices, giving the network full coverage: living room (Apple TV), kitchen (HomePods), keys (AirTags), ears (AirPods) and wrists (Apple Watch). Other products can't do it, or can't do it. The Android ecosystem is divided by a dozen competitors; Alexa can't leave home alone; and Facebook (Meta) has completely abandoned the real world.

stand. In addition to core hardware products, Apple has established a foothold in a variety of businesses, including payments (Apple Pay, Apple Card, Apple Cash), gaming (App Store, Apple Arcade), media (Apple TV+, Apple Music, Apple News), maps (Apple Maps), cloud and email services (iCloud), and even ads (App Store Search Ads).

Expertise in hardware. As more and more capital flows to a monster (software) that will swallow the world, Apple is further showing its hardware capabilities. There are dozens of large software companies, but very few (only one) have dominated hardware for decades. When it comes to refined hardware or the ability to produce actual products on a global scale, no one can match Apple. In 2021, the company sold 236 million iPhones and 58 million iPads. That's a 1,400-mile stack of equipment -- 23 times more than Bezos' "Space Journey."

trust. The outcome of most wars is doomed before it begins. Trust is a hidden danger to attack Apple's military. One of the greatest brand moves of all time saw the importance of privacy and put a lot of money and energy into it. Apple's vaunted iOS tracking changes are ninja-like moves, not by sheer force, but by cracking down on its pain points to prevent privacy leaks. The invasion of privacy is at the heart of Apple's rival business model, and cracking down on it leaves them at a loss.

capital. In 2021, Apple generated a staggering $93 billion in free cash flow (cash flow from operations - capital expenditures), which gives Apple the money to invest in other opportunities. That's on top of the $22 billion R&D budget. That means Apple could be investing $126 billion in new competition every year. This number is very staggering.

And Apple's stock is also currency. Tech companies typically make acquisitions for 10% or more of their total value. What can Apple buy with 10% of its market value?

By the way, Apple's 10% stake is $290 billion.

Apple could gobble up all of these companies for a relatively small sum of money compared to Salesforce's acquisition of Slack. Then, the following year, Apple could acquire Salesforce ($197 billion market cap). That's not to say that Apple can or should acquire all markets at once, but its market capitalization gives it nearly limitless strategic agility.

So, with more than $100 billion in cash and more than $290 billion in M&A funding, what's next for Apple?

Tim Cook's slogan is "Hardware, software and service combined". He said that twice on the company's last earnings call, and the content of those calls hinted at the company's plans. What does "a combination of hardware, software and services" include? In other words, what does it not include?

be ready

From the time Apple entered the market, it was already on its way to $1 trillion in revenue. iDevices and Macs are still setting sales records. But the Apple accessory market has more upside.

Apple Pay eliminates at least the five steps it takes to pull out a credit card. Our lizard brains (the part of the human brain that governs the part of the human brain that has nothing to do with rational thinking, but also scientifically proven to be the ancient part that controls instincts.) don't want to fumble for purses and pockets, and our conscious brain understands that it's time to count on a cheap brand It doesn't make sense that plastic handles payments better. Today we click. Tomorrow, Siri will confirm the payment through our AirPods.

In gaming, Apple is no longer a bystander. Mobile games are a nearly $100 billion market, larger than PC and console games combined, with 45% of mobile games downloaded through the iOS app store, and Apple charges 30%, which is very expensive.

AppleTV+, which produced "Murphy Brown" on a Game of Thrones budget, has had an unsatisfactory earnings performance so far. But that doesn't matter - in the end, the army with the most tanks wins. And Apple's armament makes NATO look like a peacock.

So let's play Tim Cook. If Apple goes full steam ahead and maintains its historical 7%-8% annual revenue growth -- the company will generate $650 billion in revenue by 2030. That leaves $350 billion, and you need to grab someone else's share.

consumer bank

Banks provide two things: capital and trust. With capital, there is also trust. The next step is for people to have their payroll automatically deposited into an Apple Cash account (perhaps offering an appropriate interest rate) so they can send money or print a check to recipients who don't have an Apple Cash account. Apple could or will offer checking or savings accounts with modest tweaks to existing features.

Thus, Apple entered the loan business and investment products. Auto loans (preferred rates for Apple cars?), home mortgages, lines of credit. With margin trading and cryptocurrencies, that could expand Apple's brand, but it could do something akin to Goldman's Marcus product, a robo-advisor that steers clients' investments toward holding diversification.

The largest U.S. banks all have revenues of around $35 billion in consumer banking. Investment advisors such as Schwab and Fidelity have a turnover of $10 billion to $20 billion. The industry is rife with new competitors and uncertainties. Apple is a global business and is ready in many ways. It's a $75 billion business by 2030 for Cupertino's steel bank.

search

Search is the most powerful advertising channel in history. It is the basis point for trillions of consumer purchases and the greatest leverage point for marketers. Google earned $149 billion from advertising in search results last year -- more than the world's television and radio businesses combined, and soon to overtake the print industry. Apple already sells ads in App Store search, albeit on a smaller scale. But the impact of search is huge and cannot be ignored.

Apple is unlikely to squeeze as much ad revenue from search as Google. Because of its role in the overall advertising ecosystem, two decades of advertising AI expertise, and no moral bottom line, the search giant has a structural advantage. But by 2030, $50 billion in annual revenue is achievable.

healthy

Apple has so far positioned the Apple Watch's health features as a feel-good consumer benefit. If it detects that a person has fallen, it calls 911. The heartbeat is not normal and it will tell you to contact a cardiologist. But on Apple's most recent earnings call, Tim Cook said, "our work on health features is still in the early stages." Apple is continuing to build a range of sensors (hardware) and data mining and analysis tools (software). Recent achievements: exercise heart rate monitor. A little further up: hearing aids. But what could be next? Serve.

"Hey Siri, do you think this mole is suspicious?"

Unless CVS starts getting devices into customers' hands, the best decision it can make is to pay to be the default comprehensive health care provider on the iPhone — Apple's version of health care in partnership with Google Search. Google paid about 6% of revenue for the contract. If CVS did the same calculation, Apple would receive an additional $17 billion a year in direct deposits.

Or, Apple could just...become CVS. There's nothing stopping the company from turning the iPhone into an automated tracking device akin to Jokr's network of dark stores that deliver all consumer health products (plus diapers) to your door. Health services and premiums aside, Apple could kill CVS' product sales. To what extent is reasonable? half? one third? A quarter, so to speak: $75 billion by 2030.

fitness

A year ago, I said that Peloton's $36 billion valuation was hardly justified. For Apple, however, I think it's reasonable to pay $36 billion for two to four hours a week of the world's most influential people. Now Peloton is 30% off, worth $10 billion.

Peloton expects revenue of $5 billion this year, but that's without Apple's backing. Fitness is a bigger market. About 64 million Americans join fitness clubs, a $40 billion industry. Gym memberships are skewed towards (yes) wealthy people - I guess 75% of these people own an iPhone. Nike's annual revenue is close to $50 billion. By 2030, a $20 billion industry will be Apple's.

home automation

Home automation is an $80 billion market thanks to the potential of upgraded appliances, new technologies and services. The current Apple Home product is weak, but once the company targets it with a $22 billion R&D cannon, Apple will be a formidable competition in a category that involves listening to your every word and monitoring your every movement By. Plus, the sheer amount of friction in home automation is maddening. Apple reigns supreme when it comes to integrating devices, and that's where the familiar territory of iOS and the iPhone in your pocket really shine.

Connected doorbells, thermostats, and speakers are all good, but one device rules American homes: the big-screen TV. Rumors about the Apple TV are a Silicon Valley cliché. The global smart TV market is worth over $300 billion and is expected to grow to nearly $1 trillion by 2028. It's a natural fit for Apple, which makes industry-leading displays ranging from 1-inch to 32-inches (including the $6,000 nano-textured glass Pro Display XDR). It will be bundled with Apple TV+ and integrate Apple's ecosystem and features, including Facetime and Shareplay.

I don't think Apple will launch a connected refrigerator by 2030 (not that I won't buy one), but it's another $20 billion opportunity between smart TVs, automation controls, and other devices.

car

This is clear: When Tim Cook stood on stage in front of an Apple car, for the first time overnight, $250 billion in shareholder value moved from someone who found humor in a Hitler memo to someone who never found himself in this on a person of this status.

An Apple car is in the pipeline, and it could change the company's business like the iPhone. I don't want to get carried away with the market cap issue, but imagine how much Apple would be worth if it started getting the standard multiples that the EV market now has.

Today, Tesla controls about 70 percent of the U.S. electric vehicle market and generates more than $50 billion in annual revenue. Tesla's earnings are like a drunk tourist stumbling home with a Hublot late at night. In my opinion, a conservative estimate is that Apple would take half of Tesla's sales: $25 billion. This is a high-growth market, and I expect to see $50 billion in Apple cars parked in parking lots by 2030. Tim Cook has cost Facebook a quarter of its market value just for violating privacy — and Apple cars will cost Tesla a similar share of his company's value.

Authentication and uncertainty

The breadth of Apple's ecosystem will sweep over more relatively small opportunities. Anywhere that requires an ID to get in can hand over the infrastructure to Apple. Expedited airport security as a premium service, like Clear, is clearly an appropriate option, and why not just hand over the entire interface to Apple at Madison Square Garden and the Colosseum at Caesars Palace? Four billion dollars can be counted here.

The following relates to my field: education. Now is the time for Apple to show up at the reunion as an alumna who wants to make a difference. Education in the United States, from preschool to college, desperately needs a technological revolution. The leading supplier is Blackboard, a privately held company whose product is... not bad. Apple could be the operating system for education — Chegg, Coursera, and Udemy: $2 billion a year.

Combine all of that and more, and Apple could make $10 billion out of it.

B2B

The inevitable link in the tech cycle is that innovation sparks in the consumer space, but as the technology matures, smart players move to where the real money is made... the B2B economy. In 2020, Apple Inc. acquired a startup called Mobeewave for $100 million. It's not an attractive acquisition like Beats, so no one cares. But we should pay attention. Mobeewave has developed technology that allows smartphones to process payments with the tap of a credit card. In other words, it turns the iPhone into a credit card reader.

That's bad news for payment processors. For Square in particular, it has been working hard since 2009 to install terminals in coffee shops. Apple's strategy is different. It just has to turn on a feature in the next software update, and then there are a billion credit card machines. Square started off with a suite of services that Apple didn't have, so this looks like a collaboration. Of course, just like a virus cooperates with a host.

Today, Apple relies on AWS and Google to supplement its own data centers just to handle its consumer iCloud business. But Apple is one of the world's largest data center operators, and it's completing a five-year, $10 billion expansion. It's only a matter of time before Apple flips the script and offers its own commercial cloud service.

Half of Square's revenue (excluding its "revenue" from Bitcoin) + half of AWS's revenue = $35 billion. Eight years from now, it will be $50 billion.

use imagination

Imagine that Apple did the above. We will have the first company with $1 trillion in revenue.

At this week's Pivot MIA conference, my NYU colleague Aswath Damodaran called Apple a "rare exception" to the life cycle rule for nearly all companies. He attributes part of its success to discipline. The company's biggest acquisition ever? Acquired Beats for just $3 billion -- nearly eight years ago. They've been focusing on cars, AR and TV for over a decade. If it's the first company to hit $1 trillion, and we think it will be, it's likely because Cook and Apple aren't in a hurry to get there.

Life is so rich.

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