CEO Tim Cook is mostly getting attention for Icahn’s request for share buybacks. But he also writes a long analysis of the company’s business.
Here’s a line you might want to think about if you are about to buy an iPhone 6.
Ever since the introduction of the iPod, it’s been well-known that a part of Apple’s competitive advantage is its “eco-system.” Once you have a Mac, its easiest to buy your music through iTunes, which syncs up to your iPhone, which by the way can control Apple TV and can send all your photos to the iCloud… and so on. Buying one Apple product has a way of hooking you in.
But that word “annuity” is interesting too. An annuity is an investment that locks in a regular stream of income over a lifetime. What the iPhone does so well, that laptops and even iPods can’t, is put you on a fairly reliable treadmill of regular upgrades — and thus regular payments to Apple.
At the end of every two-year wireless contract, or one of the increasingly popular buy-on-installment plans, the easiest thing you think you can do is rollover to the next new iPhone. After all, your monthly costs won’t change if you do. Icahn calculates that the average iPhone owner pays $20 a month for the phone.
What could change this scenario? Basically, Google, which Tim Cook has called Apple’s only competitor. The more that your pictures, music and contacts live on Google’s cloud instead of Apple’s ecosystem, the more likely it is that you’ll consider a different phone at some point.
Still, the bet Apple investors are making is that you’ll be shelling out that regular $20 for a long, long time.