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IPhone 4-Year Lifecycle Means Recurring Revenue For Apple

|Includes:Apple Inc. (AAPL)

In 6 months, even if my iPhone 4 is in perfect condition like the day it was made back in 2010, it will be less functional and slide ever so quickly into obsolescence.

iPhone 4 was the first iPhone that featured the retina display. It was the most visible and significant upgrade after the release of the original iPhone in 2007. There are estimated 100M units of iPhone 4 currently in use [estimate from Unity].

Until now, iPhone 4 has been allowed to upgrade to each new version of IOS. These upgrades provide new features, bug fixes, and security patches. For many iPhone users, the motivation to upgrade comes from the apps that they use. When these apps are updated to a new version that requires Apple's newest IOS, suddenly the IOS upgrade becomes no longer optional.

The decision by Apple not to provide a version of IOS 8 for the iPhone 4 forces the iPhone 4 to become functionally obsolete, on the 4th year of its release. This 4-year upgrade cycle is a pattern that will be repeated. Planned obsolesce will become an increasing contributor to Apple's financial stability as the installed pool of IOS devices increase.

Investment Implications

  • Revenue model for Apple (NASDAQ:AAPL) should include the 4-year planned obsolescence cycle for its IOS products
  • Apple's financial stability is currently under-appreciated, and will increase over time
  • This is one more reason to categorize Apple as a stable income / dividend stock, with potential growth upside as a bonus

Disclosure: The author is long AAPL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Stocks: AAPL