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Apple dumps wireless router development, will exit the market

Apple has manufactured its own line of AirPort cards and routers for 17 years, dating back to the introduction of the original AirPort Base Station in 1999. Now, the company is apparently planning to kill its support for the AirPort division, not long after announcing it would also exit the display markets. It’s been more than three years since Apple announced a new base station (its last update, in 2013, added support for the 802.11ac standard), so this move isn’t entirely surprising — but it’s also a further sign that Apple is consolidating its product lines.

This new report comes courtesy of Bloomberg, which notes that router revenue is a tiny slice of Apple’s total sales. These products, along with its displays, Apple Watches, and Apple TV are all gathered in “other products,” and that division only accounts for about 5% of Apple’s sales, for a total fiscal 2016 estimated revenue of $11.1 billion. In and of itself, this isn’t likely to have much impact on the company’s bottom line, especially since there are cheaper, faster routers available these days from many other companies, and for less money.

A potential longer-term issue, however, is the overall stickiness of Apple’s product family. One of the things Apple has historically done extremely well is create an ecosystem of products that tie together. Most manufacturers make only a passing effort to do this, but Apple focuses on it (or at least, focused on it) as a core competency. AirPort routers with Time Capsule offered backup capabilities that technically worked with both Windows and Mac PCs, but were integrated and supported better under OS X than their PC counterparts. At least in theory, you could buy your smartphone, tablet, laptop, desktop, router, display, and peripherals all from the same company, with an Apple Watch thrown in to boot, were you so inclined.

It’s not surprising to see Apple cancelling older product lines that aren’t contributing to the company’s bottom line, but Cook has yet to articulate where or how he’ll replace these products with new hardware (and new revenue opportunities). It’s possible that the advent of cloud computing has Apple putting less emphasis on physical equipment and more on creating an ecosystem of products it can sell people as part of an Apple-centric cloud services standard. Certainly the company’s push into music streaming could be argued to support this trend, though Apple hasn’t really unveiled the kind of pervasive cloud ecosystem that companies like Google, Microsoft, and Amazon have been focused on developing. For now, Apple has simply replaced its former dedicated product lines with third-party hardware sold through its own sites, and we know the company sharply pulled back on its self-driving car investments earlier this year.

A cynic might conclude that Apple is battening down the hatches. Dongles can help raise margins, and killing underperforming products improves the bottom line, as does cancelling uncertain hardware. With the iPhone 8 rumored to adopt OLED screens and potentially a larger display, Apple seems to be putting more emphasis on making the kinds of moves Wall Street likely wants to see, as opposed to trying to push the envelope with new products. Then again, trying to anticipate fundamentally new technologies is extremely difficult, and one could argue that Jobs’ tremendous success owed much more to being in the right place at the right time than to any particular skill. Either way, Apple is trimming its product lines and investments — whether to gear up for something new or to protect its profits as smartphone growth slows remains to be seen.

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