Apple Inc. (AAPL) stock owners know all too well that meteoric growth is no longer a given. iPhone sales fell for the first time ever last quarter, overall revenue was down 13%, and sales in China, once considered the next engine of growth for Apple, cratered 26%.
Looks like it’s time to turn to India.
Apple, the world’s most valuable company, has to think big when it thinks about its end markets, and India’s 1.2 billion populace certainly counts as large. Large enough, hopefully, to move the needle for AAPL stock, which is why Apple CEO Tim Cook is visiting the country on Tuesday.
Cook’s trip to India isn’t just a vacation — like his trip to China, it has potentially huge ramifications on Apple’s vision for the future.
AAPL Stock: Truly a Foreign Investment
If you own AAPL stock, as so many investors do, it’s important to remember just how heavily the tech heavyweight relies on overseas revenue. Last quarter, 62% of Apple’s revenue came from ex-U.S. markets.
But with sales in China now declining, Tim Cook is smart to embrace India: Apple’s revenue in India rose 56% last quarter, making it pretty much the only bright spot geographically.
Cook’s trip to India seeks to make the country an even bigger part of AAPL stock’s future. He’s expected to announce plans to fund a startup accelerator and expand its software development center in the country, according to Reuters. He’ll meet with Indian Prime Minister Narendra Modi at some point in the next few days, who is likely to press for Apple to set up more production facilities in the country, according to the report.
Strengthening ties with India’s top brass and its tech community is smart for a few reasons. Apple’s software ecosystem will become an increasingly important catalyst for AAPL stock going forward as its hardware sales lose steam, making investments in that area more important than ever.
But also, it’s important for AAPL to get cozy with decision-makers and Indians in general if it ever wants to gain meaningful market share, which currently rests around 2%.
In China for example, there’s an unspoken rule that if you’re a foreign company doing big business there, you’re expected to invest in the country as a token of goodwill. Apple understands that, and its $1 billion investment in the Chinese ride-hailing startup and Uber rival Didi Chuxing last week shows you just how large tokens can be nowadays.
Apple, which is negotiating the opening of its first retail store in India, seems to be following the same strategy in India, although it’s unclear how large its Indian commitments will be.
Another planned meeting at the end of Cook’s trip could end up being even more meaningful for AAPL stock owners: A sit-down with the founder of India’s largest mobile network, Bharti Airtel. You’ll remember that striking a deal with China Mobile Ltd. (ADR) (CHL), which had 760 million subscribers when the deal was struck in early 2012, was a crucial part of Apple’s Asian expansion.
Cook’s decision to rinse and repeat is wise, and frankly, almost a necessity for Apple shareholders.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
