Apple still a "computer hardware" company?

In one of our last post we have asked ourselves, if it is still appropriate to group Apple under the "computer hardware" sub-industry.

 

Has Apple become more and more a software company over the course of the last years?

Personal impressions might lead one to think so. iTunes and the App-Store could make you think that these are the real money printing machines. And an iPad or iPhone is not really a "computer".

 

Let's look at the facts

In order to find our what fraction of Apples (AAPL) revenue comes from "software" vs. "hardware" we take a look at the last annual report from Apple. This means we are are going to measure the relative contribution of each product category to Apples total net sales. Once we transform that data into a nice chart we end up with the following...

Relative contribution of Apples products to net sales

For us this was indeed very surprising. The fraction of net sales coming from software and iTunes has declined over the last four years! It is important to note that we are talking relative numbers here. That means the absolute net-sales coming from software and iTunes are growing considerably, but the net sales coming from iPhones and iPads are growing tremendously faster. And that lowers the relative contribution. Overall the growth is stunning and the absolute numbers are summarized in the following chart:

Apples net sales by products

To summarize...

Macs are becoming less important (again: not unimportant, but relatively less important to net sales). iTunes and software sales are growing, but relatively slower than iPhones and iPads. So is it correct to group Apple under "computer hardware"? It still seems so and at least Apple is obviously NOT a software company. It will be interesting to see how these trends continue. We tend to think that the growth rates of iPhones and iPads will slow down, while the growth of iTunes and software might continue. This could lead in the future to an increasing share of net sales coming from iTunes and software for Apple.

What's your opinion? Let us know in the comments section!