How Apple reinvents its core business to keep growing

Last week, Apple’s Q3 2019 financial results caused a bit of a hubbub because iPhone revenue was—for the first time in seven years—less than half of Apple’s overall revenue. The cause is a slowdown in iPhone sales combined with dramatic growth in two other areas: wearables and services.

But this is hardly the first time Apple has experienced a major change in the shape of its business. In fact, Apple is a company that’s rarely stood still in terms of its evolution.

To prove the point, let’s step through 20 years of Apple’s business, five years at a time.

1999: The Mac comeback

revpie 1999q4 Jason Snell

Steve Jobs came back to Apple in 1997 and we all know what happened next. But that transformation took a while. Look at a sample quarter from twenty years ago—the fourth fiscal quarter of 1999—and you’ll see a very different company that the Apple of today.

First off, there was only really one Apple product back then: the Mac. 80 percent of Apple’s revenue came from the Mac, with 20 percent coming from other products, mostly Mac accessories. In the fourth quarter of 1999, Apple’s total revenue was $1.34 billion, generating $111 million in profit. To put that in perspective, Apple generated that much revenue every two days or so in the third quarter of 2019.

In the fourth quarter of 1999, Apple sold 772,000 Macs. We don’t know how many Macs Apple sells in a quarter now, because it stopped releasing unit sales figures last year, but it’s probably in the ballpark of four million. Keep this in mind when you consider that the Mac is now only roughly 10 percent of Apple’s overall business: back when the Mac was 80 percent of Apple’s business, Apple was selling less than a fifth as many Macs per quarter as it is in 2019.

2004: Rise of the iPod

revpie 2004q4 Jason Snell

2004 was an inflection point for Apple. After the introduction of the iPod in late 2001, sales built slowly… until late 2004, when they shot up like a rocket. The fourth financial quarter of 2004 is actually the moment before the iPod rocket exploded. It is, in fact, the last quarter in which the Mac was the majority of Apple’s business. (That’s right—the Mac has been a minority component of Apple’s overall revenue for 15 years.)

The revenue mix in late 2004 was 63 percent Mac, 12 percent iPod, and 25 percent other products. In the fourth quarter of 2002, Apple sold 836,000 Macs, more than it was selling five years earlier. But it also sold two million iPods, a number that would double in the next year.