Why Enterprise Apps Are So Important to Apple's Strategy

Tim Cook called the enterprise one of Apple's key markets. Here's why.

Apr 26, 2014 at 12:30PM
Cook Laser

This story originally written by Ryan Faas at CITEworld. Sign up for our free newsletter here.

The first headline story from Apple's (NASDAQ:AAPL) quarterly earnings is the decline in iPad sales compared to a year ago, which CEO Tim Cook described as being related, at least in part, to changes in Apple's inventory channel. Cook also pointed out that the iPad's has grown faster than any other product in Apple's history and that the company has sold twice as many iPads since launch as it had iPhones and seven times as many iPods as it had at a comparable points following introduction. There is, however, a growing perception that iPad growth could continue to stall because iPad replacement cycles are more like those of PCs, which users typically replace after three or more years, than smartphones that tend to be replaced every two years.

The second major story is the better than expected iPhone sales numbers and gains in a variety of markets around the world including the so-called BRIC countries (Brazil, Russia, India, and China) and other emerging markets. Apple noted that this growth demonstrates the company's ability to compete at both the entry-level and high-end portions of the smartphone market.

While not broken out as a specific portion of the call, a third important story is Apple's growing commitment to -- and perhaps dependence on -- the enterprise market as a driver of both iPad and iPhone growth. I first noted this trend following Apple's last earnings call in January. At various points Cook referred to enterprise and education (where Apple has a commanding 95% of the U.S. classroom market) as two of the company's key markets (consumer sales being the third).

During the previous call, Apple specifically highlighted key enterprise data points like FIPS certification for government use, the ability to create a team-focused app development server, and the incredible adoption of iOS 7 and its enterprise-focused features.

Today's call didn't include so many specific call-outs, but it did include several key points. 98% of Fortune 500 companies have deployed iOS devices and more than 90% of tablet activations in enterprise environments are iPads. Apple highlighted several companies that have made major investments in iOS devices and, more significantly, highlighted their commitment to the platform in the form of enterprise apps that each company has created for its workers:

  • Deutsche Bank has nearly 20,000 iPhones on its network, and dozens of enterprise apps.
  • Siemens has 30,000 iPhones on its network and over a dozen enterprise apps.
  • The U.S. Department of Veterans Affairs is deploying iPads to 11,000 health care providers and is developing a series of apps designed to provide quick and secure access to patient health information.
  • Pharmaceutical giant Eli Lilly has deployed thousands of iPads and has created more than for dozen apps for its employees.
  • FedEx pilots and maintenance crews rely on iPads to decrease operation expanses and provide easy access to the company's massive logistical operations.

Asked about Office for iPad, Cook acknowledged it was significant, but also said that it would've been better if Microsoft had shipped the suite earlier than its introduction last month.

Apple's success in getting companies to develop key mobile apps for iOS is significant because it means those companies are going to be far more likely to continue using iOS devices. Much as Apple's ecosystem of apps and content encourages existing users to replace their iPads or iPhones with newer models rather than switching to Android, a focus on enterprise iOS apps within a company is likely to drive further purchases both to expand the use of the devices as well as to replace aging devices, which was likely part of the "stickiness" that Cook mentioned during January's call.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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