Apple's priorities are shifting as iPhone sales continue to sink

  • Apple has made several moves in recent months to position itself to find new areas of growth as iPhone sales fall.
  • The company poached a new executive from Google to lead its artificial intelligence efforts, removed 200 employees from its self-driving car project and hired a new boss for its smart home division.
  • Apple is also preparing to launch several subscription services this year, starting in the spring with streaming video and a paid version of its News app.
Apple CEO Tim Cook
Getty Images
Apple CEO Tim Cook

As iPhone sales continue to sink, Apple has made several key moves over the last year as it prepares new offerings to juice growth elsewhere in the business.

If you've been listening to CEO Tim Cook's comments on earnings calls and in interviews recently, none of this should come as a surprise. The company has stopped reporting iPhone unit sales figures, and instead talks more about its growing base of active devices, which the company says can be used to squeeze out more revenue through its digital services like Apple Music, App Store sales and extra iCloud storage.

But it's not just about those subscription services. Apple has made several shifts in recent months that signal its preparing to move beyond the iPhone in other ways, such as artificial intelligence, the growing smart home market and digital health monitoring.

Here's an overview of the biggest recent shifts within Apple as it prepares to grow beyond the iPhone:

Subscription services

The most immediate change to Apple's growth strategy will come from a host of new subscription services launching as early as this spring.

As CNBC reported earlier this month, Apple plans to offer subscriptions to streaming services from networks like Starz, CBS and Showtime through its built-in TV app on iPhones, iPads and the Apple TV. Apple will take a cut of each subscription, but a few top streaming services like Netflix and Hulu will not be involved. Apple also plans to release a handful of original shows that will be free to stream for device owners. The company has already signed on a slew of big-name television and film talent like Reese Witherspoon, Steven Spielberg and Oprah Winfrey for its original programming.

On top of video, Apple's plans for news will start to take shape this spring with a subscription news service that will offer unlimited access to top publications for a monthly fee. The service will be built into the Apple News app for iPhones, iPads and Macs. The Wall Street Journal reported last week that some publishers are hesitant to join the news service because Apple is asking for too large of a cut of the total subscription revenues.

Apple is expected to formally announce its plans for its news and video services at an event at its Cupertino, California, headquarters on March 25, BuzzFeed News reported.

But there's likely more to come. The Wall Street Journal reported Monday that Apple is considering bundling subscriptions for other services it offers, like iCloud storage. Cheddar reported that Apple could be planning another subscription service for gaming.

Artificial intelligence

Apple may have been the first big tech company to launch a digital assistant, Siri, back in 2011, but compared with competitors like Google and Amazon, the company's artificial intelligence efforts have fallen behind. Siri has often been criticized for failing to answer questions that Google and Amazon's assistant, Alexa, can answer. (Although a recent study by Loup Ventures has shown that Siri has improved quite a bit in recent months.)

Apple gave its biggest signal that it's going to heavily invest in improving AI when it poached Google's head of AI John Giannandrea away from the company last year. Within a few months, Apple reorganized its AI and machine learning divisions under Giannandrea, and it most recently promoted him to its executive team. In addition to the reorganization around Giannandrea, Apple's longtime head of Siri, Bill Stasior, has left the company, The Information reported.

Smart home

Tying into Apple's AI plans is the smart home, where household appliances are controlled via voice or a smartphone app. Apple is largely viewed as falling behind Amazon and Google in the smart home space. However, it recently hired Sam Jadallah, former CEO of smart lock company Otto, to run the division, CNBC reported Saturday.

The gateway to the smart home, voice-controlled smart speakers, is dominated by Amazon and Google. Amazon's Echo has 70 percent of the smart-speaker market in the U.S., and Google has 24 percent, according to research firm Consumer Intelligence Research Partners. Apple's HomePod speaker, which launched early last year, only as 6 percent of the market, according to the study.

Apple's smart-home ambitions largely live within iOS, which ships with a Home app that lets you control hundreds of third-party connected gadgets like light switches, cameras and door locks. But the ubiquity of Google and Amazon's speakers has given those two companies a huge head start in the smart home.

Self-driving cars

Apple's self-driving car project, Project Titan, is one of the biggest open secrets in the tech industry. Although the company has yet to release a product related to self-driving cars, Cook said in a Bloomberg interview in 2017 that it's the "mother of all AI projects."

However, plenty of other rivals are far ahead of Apple in self-driving technology, most notably Waymo, the Alphabet company that spun out of Google's self-driving car project. Waymo has been working on self-driving cars for the better part of a decade and is already testing an automated ride-hailing service in Phoenix.

Last week, new data from the California Department of Motor Vehicles showed Apple's self-driving cars ranked the worst in disengagements, or instances when a human driver needs to take over from the automated system.

And last month, Apple removed 200 employees from its self-driving car division, CNBC reported. Some of those employees were reassigned to Apple's AI division. The Wall Street Journal reported Monday that former Tesla engineering boss Doug Field, who manages Project Titan, decided to make the cuts. The move signaled that Apple could be looking to focus more broadly on AI, not just through projects like self-driving cars.

Retail

Earlier this month, Apple head of retail Angela Ahrendts announced plans to leave the company in April after five years in the role. Ahrendts was one of Cook's biggest hires, and she has spent her time at the company transforming Apple's retail locations into hubs for hanging out and taking classes related to Apple products, not just selling and repairing stuff for customers.

Cook appointed Deirdre O'Brien, a 30-year Apple veteran and head of the company's human resources, to run the company's retail operations on top of her HR role. It's the biggest shakeup at the top of Apple's executive ranks in years. Meanwhile, The Wall Street Journal reported that Apple's retail locations could also act as a showcase for Apple's video subscription offerings by placing TVs in stores that will display clips from its original programming.

Health

The Apple Watch, with its heart and activity monitoring, is at the center of the company's digital health strategy, but its ambitions go beyond that. In a recent interview with CNBC's Jim Cramer, Cook signaled that health will be a key driver of the company's growth in the years to come.

"We are taking what has been with the institution and empowering the individual to manage their health. And we're just at the front end of this," he said. "But I do think, looking back, in the future, you will answer that question: Apple's most important contribution to mankind has been in health."

The latest Apple Watch can perform an EKG reading that can identify potential heart problems. It can also identify if the wearer falls and give them the option to call emergency services if they're in trouble. Beyond that, Apple has started to partner with health insurers like Aetna to offer free or discounted Apple Watches if the customer keeps up with certain fitness goals. The company has also had discussions with private medicare plans about similar offers, CNBC reported in January.

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