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What does Apple look like without the iPhone?

In Garfield Minus Garfield, Dan Walsh removes Garfield from his own comic strip, transforming Jim Davis's strip about a fat cat who hates Mondays into a bizarre story of a man riddled with existential despair. It's amazing what can happen, and how your perspective can shift, when you take the weightiest part of something — sorry, Garfield — out of the equation.

So now imagine Apple without the iPhone.

A tough proposition

It's not easy, even if you try. The iPhone dominates Apple's product sales and its balance sheet. And like a star exerting gravitational influence over its planets, many aspects of Apple's business are perturbed by the existence of the iPhone.

Yet the iPhone shines so bright that it sometimes makes it very difficult to see the rest of Apple. As someone who builds charts about Apple's business every three months when the company releases its financial results (which it did this week), I've had to adjust the scale of most of my charts in order to measure the heights of the iPhone. Meanwhile, the Mac and iPad and the rest of Apple's businesses get smaller and smaller — not in real terms, but simply in comparison with the iPhone.

When Apple reports its results, the iPhone stands center stage. When iPhone sales slip, as they did last quarter, the entire company is questioned. But we shouldn't lose sight of the rest of Apple's business, most notably the Mac and the iPad.

Minus iPhone

Remove the iPhone and iron out the seasonality, and what you see in this chart is a remarkably stable, successful business:

Or to put it another way, Apple's non-iPhone business is generating about $80 billion in revenue every year — roughly the same as Microsoft. The Mac generates $24 billion per year, and the iPad (at the moment) generates around $20 billion per year. Put together, that's roughly the revenue of Hewlett-Packard. Starbucks just reported its most recent quarterly revenue total: $5 billion, or roughly what the Mac generated in revenue last quarter. Facebook's blow-out quarter? $5.4 billion in revenue.

Now, it's surely true that to some degree, the iPhone is intertwined with the rest of Apple's business. Would the iPad even exist were it not for the iPhone? Surely iOS development wouldn't have proceeded at such a great pace were the iPhone's runaway success not acting as a spur. Services revenue is also, in large part, coming from iPhone-related services, and there would be no Apple Watch sales without an iPhone to connect it to.

But I'm not really arguing how Apple would do if the iPhone didn't exist. Instead, it's worth looking past the glare of the iPhone to see Apple's other healthy businesses that are too often missed as we admire the company's dazzling success. (Or freak out over a quarterly sales drop, as many did this week.)

Mac and the iPad

It's hard to truly gauge how profitable the Mac and iPad product lines are, but Apple tends to run pretty good margins, so I'd imagine that both are quite profitable businesses. And while the iPad seems to still be trying to find its level after an initial burst of enthusiasm, the Mac just keeps on selling:

That steady line for the Mac is all the more impressive when you realize that these days, the market for personal computers is pretty steadily going down. So as Mac sales maintain, Apple gains market share.

It's also worth remembering that historically, the Mac is at an all-time high. In fiscal 2015, Apple sold 20.6 million Macs, and it's on pace to do the same this year. But it didn't used to be this way: In 2010, Apple only sold 13.7 million Macs; in 2005, that number was just 3.3 million. Apple has broken its record for the most Macs sold in a fiscal year 10 of the last 11 years.

This brings us to the mystery of the iPad. The fact is, if iPad Inc. was a standalone company, its CEO would've been fired quite a while ago. But with its sales drop beginning to tail off and the expectation that the iPad will have its best year-over-year revenue comparison in more than two years this next quarter, perhaps the iPad has hit bottom. Or perhaps, at the very least, it can finally see the bottom it's about to hit.

Call me an optimist, but I can't help but thinking the iPad really will settle down in to a good, Mac-like business. Perhaps it will be a little bit smaller than the Mac for now, but over time that might change if more people decide they'd rather have a tablet than a laptop. Regardless, Apple's probably got the best tablet business in the world, and if it generates $15 billion per year in revenue, that's still pretty great.

Sometimes I worry that iPhone gets the lion's share of Apple's attention — and by the numbers, it really should. But I'm encouraged by the fact that Apple still commits to innovation in Mac hardware (albeit at a slower pace than some Mac fans might like), and has taken steps the last year to really upgrade the iPad, both hardware and software. But when you look at the size of the Mac and the iPad, that decision doesn't seem like charity, but like good business sense. And as someone who relies on the Mac and iPad, I'm grateful that Apple gives due attention to those product lines.

Garfield is the star of Garfield

Enough imagining. Will Apple ever be a company without the iPhone?

I can't see it happening. The smartphone strikes me as being a once-in-a-lifetime kind of product. When was the last time a piece of technology became so ubiquitous, so fast, around the world? (Radio, maybe?) And when will it happen again? It seems to me that the entire computer industry has been leading to this, the arrival of Internet-connected supercomputers in everyone's pockets.

Perhaps one day there will be some kind of direct-brain interface that will make smartphones seem so early 21st century. But for the foreseeable future, it's hard to imagine that Apple won't continue to be identified with its most successful product ever, the iPhone. And that's fine — so long as we don't forget the other products that are too often lost in its shadow.

Former lead editor at Macworld for more than a decade, wrote about Apple and other tech companies for two decades. Now I write at Six Colors and run The Incomparable podcast network, which is all about geeky pop culture, and host the Upgrade and Clockwise tech podcasts.

43 Comments
  • "Remove the iPhone and iron out the seasonality, and what you see in this chart is a remarkably stable, successful business:" I guess the above statement is true to an extent, it has a lot of spit in it. Let's call a spade a spade With out iphone Apple would be in some serious trouble. And it would cut their profit by 50+ percent. The economy is slowing down now and China's doing some underhanded things it's going to be interesting to see what happens with Apple the next three years. Cuz let's face it the price point on Apple phones too expensive for about 70% of the world that's why Android dominates in that category, of the global market. sent via Tandy color computer
  • "Cuz let's face it the price point on Apple phones too expensive for about 70% of the world that's why Android dominates in that category, of the global market." You are absolutely right! Android dominates the low-end, el cheapo phone market. because... (wait for it)... Apple doesn't compete in that market. That low-end market has Android manufacturers competing against each other for the bottom of the barrel. The reason why Apple doesn't compete in the cheap phone market is because: 1) Apple has a reputation for high quality products, and 2) because there is no profit in selling cheap phones. Last year Apple made 94% of the profits from the sale of ALL mobile phones (smartphones and feature phones combined) that were sold worldwide! Samsung, which sells more phones than Apple, only made 5% of the worldwide profits. That is because almost all of those Samsung phones are the cheap phones that sell in developing nations. Only a tiny portion is from sales of their high-end Galaxy phones that compete with the iPhone. The rest of the smartphone manufacturers (Android, Windows, BlackBerry) are struggling to break even, and many are losing money (some have dropped out of the race because it is not profitable for them). So I have to agree with you. Android phones "dominate" the low-end phone sales... While Apple dominates the high-end, and worldwide profits.
  • I think this is a short-sighted argument to some extent though. "Cheap" doesn't necessarily mean "el-cheapo." Just as with computers, Apple products are generally about twice the price of equivalent devices from other manufacturers. Apple could very easily make inexpensive products that would destroy the Android market (since that's their chief "plus"), they already do this in a sense by selling outdated models at discounts. They also have done something exactly like this with the iPhone SE. Also, you change the basis of the argument when you start to talk about profits. The argument is about affordability and product design, so saying that "... but Apple makes all the profits" is irrelevant in that context. The current situation is definitely weird in that the world has seen the emergence of a new, global, mobile computing platform, but the largest part of this platform (70% or so) is made up of one OS, that while essentially a copy of the other OS, is completely incompatible with it in every way. The smaller section is made up by a more innovative OS, but one that is hampered by it's very exclusivity. iOS can never drive standards or adoption because there is always this huge bulk of incompatible Android devices that need to be shifted for anything to happen. AirPlay, Lightning connectors, etc., are all doomed initiatives because Apple care's about profit more than market share. It's a pretty intolerable situation overall and does a HUGE disservice to the people actually trying to use these devices and move forward. Apple is more about it's profits now than it is about it's original goals of just "designing good devices" and "improving people's lives." If they really wanted to change the world with iOS, they would have already seen that inexpensive iOS devices are the only way forward. They are content being the rich people's choice instead.
  • How much does the new Galaxy cost? Are you sure that Apple devices cost "about twice the price"? Also check the Surface devices and Dell ultrabooks etc.....this statement just isn't true.
  • Well, I disagree and I was talking averages not specific device comparisons. I've been buying Apple product since they first existed, they always were and still are typically twice the price of the competition (on average).
  • I think you need to add some clarity to that statement: "they always were and still are typically twice the price of the competition (on average)." While this may be true when comparing devices in the same category, it's not true for devices of similar specifications in that category. Sure I can buy an inexpensive laptop for $400, but it won't have all flash storage, the same class processors, high DPI screen, or an aluminum case. If you look at similar products with similar specifications and build quality from competitors Apple products are not twice as expensive and are generally within the same price range.
  • In laptops macbooks are roughly twice the price of equivalent PC competition. Price out Lenovo Thinkpad vs Apple Macbook - there is no denying that macbooks is twice expensive as similar Thinkpad. I use a thinkpad and a macbook everyday side by side, and I must say, preference for aluminum case, as many other "pros" for macbook is very subjective. I rather have hard grippy plastic/metal thinkpad construction over slippery, cold aluminum clad macbook any day. Only thing you can really compare objectively are the specs, such as cpu, memory, performance etc, and PC continues to win hands down in that department.
  • "but Apple makes all the profits" is irrelevant" OK, so you are saying that you would rather sell twice as many (fill in the blanks) as your competitor, but have your business be financially precarious because you are barely making any profits... And you consider profits to be "irrelevant". Meanwhile, your competitor is selling less (fill in the blanks) as you are, but has a thriving and secure business because he is making almost all of the profits from the entire worldwide sales of that market. If this is your business plan, I think any sensible person would advise you never to try to start a business. ;-))
  • Exactly right. Why is everything not Apple deemed to be junk by those on this forum?
  • "Without iPhone Apple would be in some serious trouble." From the article: "Apple's non-iPhone business is generating about $80 billion in revenue every year — roughly the same as Microsoft." Serious trouble, indeed, "only" generating $80 billion per year.
  • Except they would not be generating that much money if the iPhone never existed. It is not fair to just cut the iPhone revenue and say that Apple would be as big as this article makes it seem. The company gained a lot of popularity thanks to the iPhone (and iPod). Do you really think it is a coincidence that Mac sales went up that much after 2007? Yes, they are nice machines; I have three non Apple, non-iPhone devices myself, including two Mac; but if it wasn't because of the iPhone, I'm sure Apple would not be generating that much money on the other devices as they do.
  • I do wonder what affect the iPhone has on the sales of other Apple products. For example, owning an iPhone is what led me to explore the iPad. And through the iPad I grew interested in the Macbook to increase productivity. And owning these Apple products is why it made more sense to own the Apple TV. I wonder if that train of thought is common and how it would translate if there were no iPhone.
  • I'm sure your points are true for a lot of Apple customers, me included. And Apple no doubt relies on this trend, as any business would.
  • The iPod is what got me back into the Apple ecosystem from the old Macintosh days. The success/popularity of the iPod is what helped make the iPhone possible so I really can't imagine the iPhone never existing. Apple resisted releasing another Newton back when PDAs were popular for a brief period during the Palm era.
  • Same way for me except I got iPhone, then MacBook, then iPad (since iPad wasn't out yet), then Apple TV, then Apple Watch. It's a snowball effect for sure.
  • Mac would do even better is it's own cross-platform capabilities increased. There are many iOS apps that are wildly popular that won't cross to Mac. Take the Health Kit for example, and the Activity Tracker. Any (except for the locked down Apple stuff) activity tracker that works with Android or Windows is available cross-platform from computers, to tablets, to phones. The Apple Health Kit is available on the iPhone and iPod. The iPod? Let that sink in. Really? How about iPad and Mac? Is it really that hard, Apple?
  • Actually it is hard when you consider Apple's approach to privacy. The HealthKit data can only live on a single encrypted device like iPhone. Moving that data across platforms and the cloud is very challenging and a perfect target for hackers. I'm sure they could come up with something secure but they just don't see the market desire for that yet and neither do I.
  • It never ceases to amaze me that when you get right down to it, the primary complaint against Apple in regard to its products is the price. Any reports of a less than stellar (in their eyes) profit margin will usually be followed up with a reference to price. In other words, there are a good deal of people who truly want an iPhone, but they refuse to buy one until it reaches what they consider to be a "decent" price. In the meantime, they'll play the role of anonymous advisor and try to sell everyone else on the idea that if Apple price their products in a manner in which everyone can afford them, they'd make a good deal more money, but what they're really saying is that they want Apple to price their products so that they can afford them.
  • Great article, and nice to see something on iMore with actual content, but ... Isn't it just a bit silly to talk about an Apple that *doesn't* have an iPhone business, but *does* have an iPad business? Clearly this can (literally) never happen in the real world. I get the the point is an abstract one, and that it's about Apple's finances and business, but it's a bit like writing an article like "What if we all drove elephants to work instead of cars," isn't it? A more interesting article might be what Apple would look like if *both* the iPhone *and* the iPad become generic, rarely updated devices that no longer drive significant sales (which is clearly going to happen rather soon), not if iPhone sales alone were absent from the financial equation. Does Apple reduce the number of models of iOS devices on sale and focus on the high end market exclusively? It seems likely after the latest round of price hikes. Do they instead go for sales volume and pervasiveness in the market by finally make more affordable models of their iOS devices? It will be interesting to see how they respond although the recent foray into "luxury brands" with the watch and the Apple Car project both kind of argue for them going even further up market.
  • "Isn't it just a bit silly to talk about an Apple that *doesn't* have an iPhone business, but *does* have an iPad business? Clearly this can (literally) never happen in the real world." The iPad was in development long before the iPhone. In fact, the iPad was shelved when they decided to pursue the iPhone.
  • Actually your example of iPhone to iPad is wrong. Apple began developing iPad long before iPhone but changed he order when a few technical elements fell into place. So they could've released iPad and never released an iPhone.
  • Not sure Apple would be the same without the iPhone. The iPhone is the reason I like Apple and the reason I got an iPad and will get a Mac, they just work (for the most part). Sent from the iMore App
  • I think would be the exact same without iPhone except for much less revenue and employees. They have always been minimalist when it comes to product categories and they have always been premium priced too. The iPhone just gave them a world market instead of a smaller, loyal niche market. iPhone didn't change their style or design choices.
  • All of what you said is true snd the iPhone helped people like me who would probably never have thought about buying an Apple product before. It was a gate way for me and now I want to switch to all my devices to Apple now. Sent from the iMore App
  • Apple abandoned the Mac long ago. And it will soon tire of the iPad. It's only interested in earning fat profits on on ridiculously thin widgets. It should instead focus on delivering value; and it's getting harder to justify how its products stand out from the fray. Apple's obsession with closed hardware pushes many away, those who want hardware that can be expanded and upgraded. I am in this camp. And though I am holding out for more flexible hardware, I must eventually jump ship if Apple cannot satisfy my desires.
  • Just go to Android, and be very dissatisfied there. ;) Sent from the iMore App
  • He will actually be quite satisfied. Lots of people are. Clearly the amount of iPhone switchers from Android does not outnumber Android switchers from iPhone based on market share data and last quarter's numbers. Posted from my Nexus 6P
  • For the next article, write what would Coca Cola be without Coke. And then follow up what would Chevrolet be without Trucks. Apple built a market for this very reason.
  • Just ask Carl Ichan
  • Is Apple "DOOMED" because they had their first non-record-breaking quarter in 9 years? Here are some pertinent facts, and then you can decide if Apple is "doomed": In this recently reported "horrible" quarter, Apple made $10.5 billion in profit... Apple earned more in this "horrible" quarter than Alphabet/Google ($4.2B), Facebook ($1.5B), and Microsoft ($3.8B) COMBINED. Apple's $10.5 billion in net income for the last QUARTER was more than the ANNUAL profits of all but 15 companies in the S&P 500 index, according to Bloomberg data. During the past year, Apple record profits of $53.7 billion dollars, which is equal to 40% of the entire profit pool from ALL of the Silicon Valley tech companies combined. Some people just see that iPad sales have dropped -18.8% over last year's quarter. What they don’t see is that iPad sales are doing much better and dropping less than everyone else’s tablet and convertible sales. Samsung (the number 2 tablet vendor after Apple) dropped to -28.1%, and all other vendors (including Microsoft) combined dropped to -22.5%. In other words not only is Apple selling many more tablets than anyone else, it is also seeing its sales not decreasing to the same extent as everyone else. Over the past few years, the revenues from Apple's services have gone from a tiny portion to a huge source of income. In Apple's recent financial report, the revenue from services has grown 20% YOY, and is now worth more than the income from the sales of Macs and iPads combined! Apple has approximately $200 Billion in reserve... But with the continuing high profits (including in the recent quarter) it is unlikely that Apple will ever need to dip into that reserve in the foreseeable future. If anyone believes that these facts indicate that Apple is "doomed", they must be living on Bizarro World, where "Good am bad".
  • You're obviously someone that takes all available information and uses it to form the full picture. You do forget though that there are people that have an irrational hatred of Apple, and focus on anything negative to build the idea that Apple is DOOMED. Apple are expected by many to report record revenues, profits and sales in every category, every quarter. If they don't some will line up to predict Apples demise. This has been going on since quite honestly Steve Jobs passed, and will continue despite Apple bearing no resemblance to a DOOMED company. By any metric Apple has been and continues to be a hugely successful company, to levels their competitors have no experience of. And let's not forget shall we that a great many of the products these so called competitors produce are a direct reaction to what Apple started with the iPhone. So the question shouldn't really be 'What would Apple look like without iPhone'? More 'What would the rest of the industry look like without iPhone'? I always have to laugh when the tried and trusted 'Apple doesn't innovate anymore' banner gets rolled out. Sent from the iMore App
  • They may or may not be doomed. Was 2015 "peak Apple"? Probably.
    Like any fad all good things must end. Apple may no longer be able to build things that excite Jony and instead start building things that excite the consumer. You know phones that aren't thinner but last longer and I don't know, have headphone jacks.
    Double digit losses in sales quarter after quarter will eventually lead to a doomed company.
    Carl Icahn bailed, he is smarter than either one of us.
  • The ideal of the article is imaging if the iPhone didn't exist. And the plausibility of the iPad to. If the iPhone didn't exist iPad may not have to. So what would Apple be? Maybe another struggling computer company? How much of the popularity of MacBooks may have to do with the iPhone and iPad? These maybe assumptions, but with the death of the iPod and only product being computers. Who would have developed the device that changed the market? The original Android prototypes were like Blackberrys, but shifted to touch screens after the induction of the iPhone. Blackberry would have stayed with keyboard phones, they were to slow to adjust to the change in the market after the iPhone. Palm?Windows? Nokia? Would Apple be around still? Would it have been sold to HP, Microsoft, Sony, Nokia, Google, or Motorola. Just image the implications of how cellphone, computer, and tablet markets would be different. If they exist as they do today. Would it have been couple of years later for a touch screen showed up in the market. But as Jason Snell, says the smartphone is once in a life time product. I believe we maybe or may not be fortunate to have them depending your prospective. Sent from the iMore App
  • I think he should also exclude iPad to be fair, it wouldn't exist without iPhone. They share this same ecosystem. Sent from the iMore App
  • I think he should also exclude iPad, it wouldn't exist without iPhone. They share this same ecosystem, "oversized iPhone" like some people call it. Then we will have full picture. Sent from the iMore App
  • It may be time for Apple to make products that their customers want instead of products that Jony wants.
    So many ***** moves over the years. A thinner iMac with an SD card in the back. Why? A new Apple TV with an asinine remote and next year most likely an iPhone without a headphone jack. All three things that nobody asked for.
    What do companies usually do when demand wanes? Lower price. No way Apple does that, even to goose iPad sales.
  • Remember Apple makes products that nobody knows that they want. Nobody asked for the iPhone, but once the very first iPhone was announced everyone wanted one. Sent from the iMore App
  • Jason, Thanks for the excellent article!!! I like your graphs and charts!!!
  • Dead
  • I talked with my local phone factory boss in Shenzhen about Apple and came up with this conclusion. Looks to me this is now like the mp3 race to the bottom that happened 10 years ago. The iPhone SE is affecting used/refurbished iPhone prices and puts even more pressure to Android phone prices. Apple is building up services business and you can already see where that will lead, they will make money as long as you have any iPhone. In US you pay about $30/month and will get brand new phone every year without extra charge, what happens when they expand that to other countries, recycle the phones and sell at half price to developing countries? How low the competitor's prices can go without going out of business, when they are not making any money today and it's already tough to get business loans or pay the old ones back? More child labor and unpaid salaries? What happens when Apple decides to drop the iPhone prices by 50USD because they see a need to gain market share and know they can make it back in service fees?
  • Can't get iPhone or iCloud? I. Had it before my iPad was cleared and and reset it?
  • My problem might be from the last update-9.3?
  • That's all folks!