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Apple sees opportunity in mobile-first business apps

iPadAir

Apple anticipates further acceleration in the growth of its software-and-services business following its recent technology agreement with IBM as it focuses on mobile-first applications for business users of its iPad tablets. 

As more businesses equip their workforces with iPad tablets and iPhones — anticipated as one of the upsides of the IBM partnership — those businesses will have more need for high-functioning applications developed specifically for mobile devices. That demand will fuel Apple’s software-and-services division, which was its fastest-growing revenue platform through the first nine months of the current fiscal year. 

“We think that there's a substantial upside in business, and this was one of the things behind the partnership with IBM that we announced last week,” said Timothy D. Cook, CEO of Apple, during a conference call with analysts and investors to discuss third-quarter financial results. “We think that the core thing that unleashes this is a better go-to-market, which IBM clearly brings to the table. But even more importantly, apps that are written with mobile-first in mind.” 

Many of the enterprise apps that have thus far been written for iPads were essentially adapted from their desktop versions, Mr. Cook said. That leaves a tremendous opportunity for business apps that can be developed expressly for mobile devices, and for iPads in particular. 

Under-penetrated in tablets 
Apple is working on the theory that tablet sales will soon surpass desktop sales, and encouraging business adoption of tablets will serve to spark that shift. Mr. Cook said the iPad’s penetration in business stands at about 20 percent, compared with 60 percent penetration for its Apple Notebooks. 

Apple products in a business environment.

The increased use of mobile devices for both personal and business use is driving unprecedented growth in the category of revenues that Apple calls iTunes software and services. Dollar volume in that division rose 12 percent year-over-year at Apple to nearly $4.5 billion in the third quarter. 

Despite the surging sales of apps and related revenue streams, Apple disappointed analysts during the quarter with its report on iPad volumes, which were down 8 percent year-over-year. That was partially offset by strong sales of its more profitable iPhones, which saw a 9 percent gain. 

The quarter was more profitable for Apple than it might otherwise have been not only because of the increase in iPhone sales, but also because it was able to achieve more cost savings than anticipated. That was in part due to efficiencies and lower input costs. 

Looking ahead, the company said it is anticipating that new-product launches will hep drive revenues in the upcoming fourth quarter. Those are expected to include the larger-screen iPhone 6 and potentially the iWatch, in addition to the new apps and software that will keep those devices and other humming. 

“We’re continuing to invest in our incredible ecosystem, which is a huge asset for Apple and a very important differentiator of our customer experience,” Mr. Cook said. 

Final Take 
Mark Hamstra is content director at Mobile Marketer, New York

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Related content: Software and technology, Apple, iPad, IBM

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