Apple just became the first US company to surpass $800 billion in market capitalization. Speculation quickly followed that Apple would soon become the first $1 trillion company, with a rumored $1,000 iPhone 8 coming at year’s end. The company’s share price has been on a tear since the beginning of the year, and sales of the iPhone 7 have been strong in part because of safety issues surrounding rival Samsung devices. Apple retains an enviable brand image and a devoted consumer base.
And yet, the shadow cast by past corporate behemoths is creeping up on Apple. As valuable as Apple is now and could still become, the company looks vulnerable to being eclipsed in the years ahead, if not threatened to its corporate core.
Apple makes hardware. It manufacturers a product. Yes, that oversimplifies the vast network of users connected by its software and bound by iOS. But Apple’s software is hardware dependent; it runs on Apple products. That makes Apple more like the manufacturing giants of the 20th century than like the software and digital players of the 21st. By that standard, even a trillion-dollar vote of confidence now hardly portends business immortality for Apple.
Wait, what? Apple is one of the world’s most dominant brands already, and its user base is expanding. More than 700 million people worldwide use iPhones, not to mention the hundreds of millions more who use Apple computers and tablets. While its global market share is decreasing in face of varied competitors, its overall market is still growing.
But take a look at the list of Fortune 500 companies in 1955 compared to today. As of last year, only 12 percent of the mid-20th century list of the world’s largest companies made it to the second decade of the 21st century. Of the top 20 then and now, General Motors, Exxon, and General Electric remain large and profitable. But US Steel is severely diminished, and Armour (which made packaged meats as well as Dial soap) is no more. It gets worse from there. Chrysler and GM are still major companies, but they have flirted with bankruptcy and liquidation; General Electric and IBM have managed to transform themselves many times over, and they continue to exist today only because they bear scant relation to what they were and what they sold 50 years ago. How Apple will transform itself in the coming years isn’t clear—and the company is doing little to lay out an effective vision of its future.