Apple's latest hire is a sign that it's focusing on services, not devices

Drake apple jacketJustin Sullivan/Getty ImagesApple services chief Eddy Cue high-fives Drake.

Apple’s latest hire should give you a good clue about where its priorities as a business lie.

The new guy doesn’t have anything to do with phones. Or watches. Or cars. Or augmented reality glasses.

Apple’s newest employee is Shiva Rajaraman, a veteran product manager who most recently worked at Spotify, and Google before that.

According to his LinkedIn profile, Rajaraman was responsible for Spotify’s end-to-end consumer experience, “including our apps, features, and user experience”.

At Google, he worked across a number of areas including helping creators make money on YouTube, and recommendations and search.

In short, Rajaraman has helped two of the best software companies right now get to where they are.

That matters for Apple. Revenue from its e-commerce (or “services”) business — Apple Music, iBooks, and the App Store — was up 18% to $US7.1 billion (£5.6 billion) in the first quarter of this year. That’s more revenue than the iPad, and faster growth than any other product category including the iPhone.

It’s also much more revenue than the Apple Watch, which is lumped into the “Other” category in Apple’s financial filings. As you can see below, revenue from that category was $US4 billion (£3.2 billion). That’s actually down 8% year on year.

The tech press doesn’t focus on this because it just isn’t as sexy as Steve Jobs pulling out the first iPhone. Physical gadgetry, like an augmented reality headset, is much more exciting than user interfaces.

That’s despite the fact that Apple’s biggest hardware play in recent years, the Apple Watch, is a niche product at best.

An analyst note sent by Raymond James to investors on Thursday predicted that growth in Apple’s services business will be “impressive”, even though it only accounts for about 10% of the company’s revenues for now.

“Although iPhone is the dominant contributor of gross margins today … the higher margin services business should meaningfully positively impact gross margins in the future,” according to analysts Tavis McCourt and Mike Koban.

No one raves about Apple’s software in comparison to its hardware, but the idea of hiring people like Rajaraman is to change that, and the put the company in the same league as content giants Netflix and Spotify. He’ll be focused on improving the user experience of services like Apple Music and to shape the company’s video strategy, according to The Information.

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