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Apple Inc. (AAPL): The Other Side Of The Debate

You have to be aware that Apple’s profits come materially from iPhones: 70% of revenue, or even more, but the dynamics of the industry are changing and that’s undeniable. While on CNBC,  Senior Technology Analyst Collin Gillis, BGC Partners reiterated his concerns regarding Apple Inc. (NASDAQ:AAPL), which is now reportedly selling 34,000 iPhones an hour.

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“When you get to this big of a size there are all types of dynamics that can hurt the stock. That’s what you have to point to as well as the fact that the industry dynamics are changing. So, yeah, it may not be today but if you are holding Apple you have to have concern about how large it is growing. If you had to give the iPhone away right now, then Apple’s revenue would just be a small fraction of what it is right now,” Gillis said.

The hedge fund sweetheart is on its way to becoming a trillion dollar company. The latest iPhone gave Apple Inc. (NASDAQ:AAPL) a perfect season, and Tim Cook’s first-born, the Apple Watch is all set to ship in April as they look for a repeat. Apple Inc. (NASDAQ:AAPL) is definitely not looking into the dark right now! Gillis did agree that Apple Inc. (NASDAQ:AAPL) is a tremendous company but he insisted they capture most of their profit from the lucrative smartphone market.

“I would like to see more services layers be developed and grown. If you look at that market right now, the way it is right now. Apple is 15% and they capture all the profits. But the other 80% is owned by Google which wants the phone, wants to drive these prices down and then monetize it with services – and that’s their play. I would like to see Apple push faster into services – that would make me more comfortable,” Gillis said.

Perhaps what Gillis refers to is not something we can all see in the foreseeable future, but it would be difficult for us to deny what we have seen in the past; and what we have seen success-wise with Apple Inc. (NASDAQ:AAPL) is history be written. People who buy quality do wait for the next new iPhone. Apple Inc. (NASDAQ:AAPL) is the most valuable company in the world. It is more valuable than any other company in the world.

Gillis thinks the upgrade cycle for phones is likely to lengthen. Not soon, but there will be a time when features will become good enough for consumers that they won’t already be thinking about what’s next with the newest phone in their hands. In his final remarks Gillis insisted Apple Inc. (NASDAQ:AAPL) should look into developing a services product line, like Google Inc. (NASDAQ:GOOGL), to sustain its growth.

Well, we know Apple Inc. (NASDAQ:AAPL) does not shy away from any challenge. After all, the company is spending billions on its R&D related activities, including on the development of an electric car. Let us see if Gillis’ concerns are paid any heed.

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