Friday, 01 March 2019 09:37

Apple will expand financial services play, veteran journo predicts Featured

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Apple will expand financial services play, veteran journo predicts Pixabay

Apple will increase its reach into services this year as they are much more profitable than hardware, with one such service being video streaming, a veteran technology journalist has predicted in his annual forecasts.

But more importantly, Apple would increase its profile in the finance industry, something which it had already started by financing iPhone sales in China and launching a credit card along with Goldman Sachs, according to Robert X. Cringely, one of Apple's first employees and and the author of Accidental Empires, the only history of the US computer industry.

The market was always bothered about Apple, he said, adding that this year, the worry was that the smartphone market may have peaked or that Apple was building its products too well so that they lasted too long.

"Wall Street tends to see growth as vital," Cringely said. "Funny, they never really explain why that is so. If Apple stopped growing completely but just continued to bank its normal US$127 million in profit per day, would that be so bad?"

Cringely likened the steps chief executive Tim Cook was taking to those taken by GE's Jack Welch in 1981. Welch guided GE into financial services and increased its market cap by more than 4000% in 20 years, he pointed out.

Apple had done even better than that when the late Steve Jobs was chief executive but Welch's techniques didn't need someone of Jobs' capabilities to be heading the company.

"Look for Apple to start financing lots of things in 2019," Cringely said. "Remember your car dealer would rather lend you money than have you pay cash for that ride because financing is its own profit centre.

"So iPhone prices will continue to rise, but iPhone payments will probably decline as Apple cuts out middlemen and efficiently sucks up that aspect of the phone supply chain.

"This is how Apple will arrest iPhone market share declines — by assisting sales and making even more money in the process."

In order to calculate how big a financial player Apple could be, Cringely said the company had about US$200 billion which it did not need for day-to-day activity.

"Apple is not a bank. That US$200 billion isn’t customer deposits carrying with them some obligation to return the money when asked," he pointed out.

"Apple has no branches and — beyond iPhone financing and ApplePay — is unlikely to have a financial retail presence. What Apple is probably closest to becoming is a hedge fund — a very big hedge fund, in fact."

Given this, Cringely said those who were claiming that Apple was in decline or had no idea what to do next in order to stay profitable had no clue what they were talking about.

"Apple will continue to compete in its established technology markets as well as new ones," he said. "But Apple has also found a US$200 billion hobby that will keep it growing for the next decade no matter where the IT market goes."

Cringely issues a list of predictions every year but has said this will be his last year of doing so.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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