US technology giant Apple crossed an amazing milestone recently, when its market capitalisation exceed US$500bn for the first time.
The company joins an elite club of companies whose market worth have been over this level. Only Microsoft, ExxonMobil, Cisco and General Electric have previously achieved this. It is remarkable growth for a company that was worth just US$10bn a decade ago.
Apple has transformed itself from personal computer producer to a multinational corporation offering cutting-edge hardware and software technology solutions. The success of the iPhone and iPad have been a major driving force: the products, neither of which could be bought five years ago, now account for around 72% of Apple’s total revenue.
The strategy of allowing different products to interlink and having a vast array of applications that can be downloaded via iTunes, has helped fuel demand: there is a constant supply of new or updated apps that can be download at a small fee or for free.
It is likely that all the products released this year will have had input from co-founder Steve Jobs, who passed away last October. It will be another year before we will know if Apple can continue to innovate without his influence. The iCloud Service was the last product launch that Jobs presented. This is an online storage and syncing service which allows users to transfer music and other data between Apple devices. The company recently announced that more that 85 million people have signed up for it.
One UK company that benefits from an increase in consumer spending on hardware is technology company ARM. The group makes its money from designing, patenting and licensing semiconductors to the hardware manufacturing industry. The focus is on creating energy-efficient chips, which has helped push ARM to the forefront of the mobile phone market.
ARM has chips in over 90% of all smart phones and tablet computers sold today, and is expanding into digital televisions and computers. The company has benefited from strong sales in smart phones as it receives royalty revenue from the sale of the devices.
The technology sector is a dynamic area and is constantly evolving. Of course, it is not without its pitfalls, and we have seen the volatility that occurred in the sector during the dotcom boom and the effect that a change of product can have on a firm’s revenue.
There are several other UK companies with exposure to this sector, and collective investment funds to give an investor diverse exposure to global technology companies such as Apple.
Steven Keppie Steven.Keppie@Brewin.co.uk