Can Apple defy gravity and keep growing?

The world's biggest company is now twice the size of its nearest rival but, as Newton discovered, swollen apples tend to fall to earth.

by Adam Gale
Last Updated: 09 Mar 2015

If Apple Inc boss Tim Cook needed cheering up for some reason today, he would do well to look at his firm’s market capitalisation. The Cupertino tech giant is now worth $774bn (£503bn), twice as much as the world’s next largest company Exxon Mobil or 1.7 trillion times as much as a Bramley apple from your local Tesco.

Apple shares are currently trading at $1.33, up 77% in the last 12 months. This has helped it surge ahead of Exxon Mobil and the other oil colossi, which are choking on cheap crude. Exxon Mobil has lost 15% of its value since July, with shares now trading at 89 cents.

The runaway success of the iPhone 6 has been central to Cook’s good year and Apple’s increasing valuation. Sales of 75 million units helped the firm deliver a record profit of $18bn in its fourth quarter. This in turn has edged Apple’s iOS ahead of Google’s Android operating system in US mobile market share for the first time in 3 years, according to Kantar Worldpanel techCom. In the last quarter of 2014, 47.7% of devices in the States used iOS, along with 24.1% in Europe.

This is all very impressive, but will it last once the iPhone 6 boom fades out? Unsurprisingly, Cook thinks it will. ‘We don’t believe in such laws as laws of large numbers. This is sort of an old dogma that was cooked up by somebody,’ he said at a conference earlier in the month.  ‘Steve [Jobs] did a lot of things for us over many years but one of the things he ingrained in us is that putting limits on your thinking is never good.’

Apple leads the way in brand value and market cap, but these aren't the only measures of success. Chart: HighCharts. Sources: last available full year results, Forbes, Fortune, Yahoo, Google, Shell.

The company’s putting some of its immense quantities of money where its mouth is, announcingyesterday that it’s going to built two huge data centres in Europe by 2017, at a cost of €1.7bn (£1.2bn). The two million square feet centres, in County Galway in Ireland and Jutland in Denmark, will allow Apple to handle increasing traffic to its iTunes and App store services.

Crucially, investors are valuing Apple so highly because they also expect it to continue to astonish them with record profits and market-transforming products. It’s been Apple’s burden since the iPod came out in 2001, and so far they’ve generally managed to meet those expectations.

All eyes are currently on the Apple Watch, which is due to come out in April. The jury’s still out, however, on whether the Apple Watch can join the iPad or iPhone in the pantheon of Apple greats. Compared to those products, it’s behind the curve. Rivals Sony and Samsung have both had smart watches out for some time.

This may not prevent Apple Watch from becoming the market leader overnight, but it does increase the expectations it has to meet. If it’s not noticeably better than what’s already out there, people may start asking what the hype was about.

Just as importantly, smart watches may not be the next big thing, as the prophets of wearable tech would have you believe. Google pulled its Glass because it looked too nerdy, and a recent study by mobile app developer Apadmi found that 35% of UK consumers would be embarrassed to be seen with wearable tech in general. Even if this is just pre-adoption jitters, smart watches are a legitimately tough sell for some people. Is it really that much more difficult to reach into a pocket to look at a phone with far more features and a far bigger screen than it is to fiddle with your watch? The number of people who’ve stopped wearing watches altogether would indicate not.

Of course, the ever optimistic Apple is having none of that. According to a Wall Street Journal report, they’ve ordered five million Apple Watches for the launch. Given that these will range in price from approximately £300 into the thousands for a gold plated Edition model, this could be a nice little earner - if people buy them.

Whether the Apple Watch breaks the mould in 2015 like the iPad did in 2010 is perhaps not the question to be asking. If it doesn’t live up to the hype, Apple will come down to earth a little, but not a lot. It will still be the brand to beat in consumer tech, across a whole range of categories. Indeed, there are rumours circulating that it's working on driverless cars to rival Google and virtual reality headsets to take on Facebook's Oculus Rift.

As a consequence, according to Forbes, Apple has the most valuable brand in the world, at $124bn. Add to that its $150bn cash pile, the decent chance that it will continue to innovate in the post-Jobs era, and the fact that oil companies aren’t looking like bouncing back any time soon, and Apple’s place on the top branch of the world’s companies looks fairly secure.

Read more: The agonies and ecstasies of Apple under Tim Cook

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