How Apple can get to a Trillion Dollar Valuation

For the first time in Apple’s history, its market cap reached approx $750 billion dollars recently. Articles have come out stating Apple could become the first trillion dollar business on the planet. It is hard to believe a company so close to bankruptcy in 1997 has come back to become one of the largest companies in the world with a brand recognized everywhere and a market cap of over $750 billion. Thanks to the brilliance of Steve Jobs and his iPod, iMac, iPhone and iPad, Apple has reinvented itself from the computer company it was in its early existence to the powerhouse consumer electronics company it is today.

However, I wonder if they can achieve another $250 billion of market cap with just the products they have on the market today. iPods are slowing dying as iPhones have literally taken their place as the go to music player. The good news is the market for smartphones is still growing and will continue to be a growth market for at least another three years, if not longer. Also, Apple seems to have won the higher end of the smartphone market which carries very good margins, thus allowing the product to drive the core of profits for some time. iPads, while still an important product, have seen some market decline given the strong competition for tablets all over the world. The good news is Apple is still selling a lot of iPads with good margins and, even if it is not a growing business, it is a relatively stable one. Another bright spot is the Mac line of computers. iMacs are still selling very well and demand for Apple’s MacBook Pro and MacBook Air are at all time highs. In fact, during the last quarter, Apple sold five million Macs compared to only four million in the same quarter in 2013. These too have great margins and add to Apple’s bottom line.

There are four other products in the wings I believe will need to be successful if they are to ever top that trillion dollar market cap. The first is a product that used to be a hobby but is now quite a serious business. Apple has sold over 2 million Apple TVs and Steve Jobs made clear to his biographer Apple still has major plans for TV in the future. While I don’t think Apple will do an actual television, I do think they are going to drive a lot more innovation with the Apple TV external box and link it with a newer, immersive, and interactive UI and content deals that could reinvent the TV experience. If they get this right, it could add a significant new revenue stream in the future.

They also have the Apple Watch, ready for market in early 2015. While it is too early to tell if this will be a big hit, I have watched Apple enter new markets and make big waves and I have a sneaking suspicion this product may be another one that captures the imagination of a lot of people, especially those committed to the Apple ecosystem. We will all have a better handle on this when they finally ship in 2015 but I do expect it to be another financial success for the company that could add a significant amount of revenue and get them closer to this trillion dollar valuation.

There is one other area slightly related to the Apple Watch. I believe this will be Apple’s foray into the health care mediation system. When using their health app and the Apple Watch, Apple will, with a user’s permission, collect health related data that will be useful for the user and other health monitoring devices that dump data into Apple’s health app. That data could also be useful to a person’s health provider. I believe, eventually, Apple will become a broker of that health data between a patient and their health providers. Of course, they will need the permission of the users to give data to their doctor but if it helps the doctor monitor health conditions and can be used to keep them on track, I think a lot of people would be willing to let Apple send their health data to health care providers. That data will become very important to these providers and they will be willing to pay for it as part of an Apple driven mediation system. If this works as I think, it could eventually become one of Apple’s biggest cash cows.

There is one other initiative that could really be a big winner. Earlier in the year, Apple did a deal with IBM to serve as a partner in enterprise programs that includes dedicated IBM software ported to Macs and IOS and taps into IBM’s direct sales force and service organization. This is a big deal and has serious potential for helping Apple extend their presence in corporate markets. While we have not seen the fruits of their labor yet, we should get a glimpse of how this relationship and strategy will work shortly. Do not underestimate the potential impact of this deal to bring additional profits that would contribute to a trillion dollar valuation.

Combine these other products and their long term potential and it is at least conceivable Apple could, at some point in the next 5 years, become the first trillion dollar company in the world.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

5 thoughts on “How Apple can get to a Trillion Dollar Valuation”

  1. I think Apple Pay has the potential to add to the bottom line over time as well. It might not drive revenue like the iPhone but I can imagine it adding significantly. What are the costs associated with Apple Pay?

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