Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Money News

Behind Apple’s Push to Sell Services

September 17, 2019

3 min read

Most people know Apple for its slick laptops, smartphones, and watches.

But the Cupertino, California tech giant is also transforming into a service business. Last week, during Apple’s annual new product show, it displayed its new iPhones and iMacs, but it also discussed details about something else that shows how the company may be changing. It talked about its new offering Apple TV Plus—a streaming service that will compete with Netflix, Disney and others, for $5 a month.

Only a few weeks prior to that, it launched a credit card, in partnership with the bank Goldman Sachs. Apple TV and the company’s new credit card will also join iTunes and Apple Pay as services the company offers.

So why does Apple seem to be venturing into territory that’s further and further away from its computers, laptops, and the other hardware it has traditionally sold?

We’ll explain why companies sometimes decide to change course and try something new.

More about Apple

Along with companies like Dell and Microsoft, Apple has helped define the personal computing market—we’re talking desktops, laptops, and related gadgets.

But sales for many of Apple’s items have leveled off recently, particularly for iPhones, which make up nearly half of Apple’s annual sales. Why? There are plenty of competitors offering products that are a bit cheaper than Apple’s $1,000 iPhone. Also, the market may be reaching a saturation point, meaning all the people who will buy iPhones already have them.

On the other hand, services represent a growing part of Apple’s sales. We’ve written before about how to research a company’s stock, through something called a 10-Q or a 10-k. These are earnings reports a company is required to file with the Securities and Exchange Commission, detailing facts about its financial operations.

Example: In Apple’s most recent 10-Q for the second quarter, 2019 (you can find that here), you’ll see at the very top that it breaks down its sales by products, and then by services. Notice how the amount of revenue for its product sales decreases, while revenue for its services business continues to increase quarter over quarter.

What’s a service

In the business world, a service is a transaction where no physical goods are exchanged. In other words, you don’t wind up with a physical product, the way you would if you purchased a car or computer.

Services can include things small things like:

But they can also include entire industries such as:

Why do companies change direction?

It’s actually a common occurrence for companies to change directions. Sometimes they have to, for a variety of reasons. Markets become mature—which means essentially the company has sold just about all the products to consumers that anyone wants. So they have to develop new lines of business to stay profitable.

Services can be an obvious choice, since companies may have already developed much of the technology they need while pursuing other business lines, including computer and distribution networks, as well as products.

Another example is Amazon, which began to branch out from online book sales to all e-commerce sales in the early 2000s. As it grew and developed into the largest e-commerce company in the U.S. based on sales, it started offering other services, such as web hosting and streaming video. It also branched out into devices including the Kindle, Echo, and Chrome tablets.

Follow the Stash Way

Stash encourages new investors to diversify, invest regularly, and to invest for the long term. You can find out more about our investing philosophy here.

Welcome to your new financial home.

Start today with as little as $5.

Get the App

Believe in an industry?

You can invest in it and many more!

See options on Stash!

Believe in an industry?

You can invest in it and many more!

See options on Stash!

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
budgeting pop culture Careers politics Technology

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.