Four times the value of Chevron. Five times Coca Cola. Nearly 10 times General Electric.
As Apple on Thursday became the first U.S. company to top $1 trillion in value — an amount higher than the gross domestic product of most nations — it prompted a reckoning on how the old economy has yielded to the new.
“Our economy has become dependent upon innovation as a source of growth,” said William Lee, chief economist at the Milken Institute, a nonpartisan think tank.
The iPhone, in other words, has proved mightier than cars or planes — at least in investors’ eyes.
The Cupertino company’s milestone, powered by strong sales figures Tuesday for products including the $999 iPhone X, also reflects just how far Apple has come.
Two decades ago, it was hurting. On Dec. 31, 1997, the stock opened at a split-adjusted 47 cents, as the company, founded in 1976, struggled to reprise its early success selling popular computers. That year, co-founder Steve Jobs returned to Apple. Under his leadership, Apple began its turnaround with a series of popular products, including the iMac, iPod, iPhone and iPad.
“These devices, they’re the linchpin” of the economy, said Ken Rosen, chairman of the Fisher Center for Real Estate and Economics at UC Berkeley, who owns Apple products. “The telephone looks like a minor experiment compared to this.”
Apple has also had a tremendous impact on the Bay Area. It recently opened its futuristic headquarters in Cupertino, and it is expected to employ about 24,000 people in the city of 60,000 by 2020 — a reflection of the outsize influence the industry exercises in the region.
Rosen estimates that tech companies account for about 70 percent of the demand for office space in the Bay Area.
“The downside is we’re loaded on one big industry,” he said, adding that he expects to see a correction in tech stocks within the next three years. “We’re going to have some indigestion.”
Gene Munster, a managing partner at the venture capital firm Loup Ventures, said that when he started covering Apple in 2004, he didn’t think it would get to this point. In December 2005, the iPod — introduced in 2001 — made up roughly half of Apple’s revenue, and today it is less than 1 percent, he said. The iPhone has taken the iPod’s place in many homes.
The iPhone “all but destroy(ed) the iPod business,” Munster said in a research note. “This illustrates what’s most impressive, the company’s ability to rapidly innovate.”
Apple is not the first company to surpass the trillion-dollar mark. In November 2007, PetroChina was valued at more than $1 trillion on the Shanghai stock market. Analysts at the time said it was boosted by rising oil and gas prices, according to the Guardian.
PetroChina slipped below the $1 trillion mark roughly a year later to less than $260 billion, according to CNBC, citing Bloomberg data. Apple certainly could too.
Apple’s valuation is remarkable, said Moody’s Analytics Chief Capital Markets Economist John Lonski, and “likely to raise a few eyebrows (on) the sustainability of that type of valuation.”
Apple is in a fast-changing industry, he said, and investors have come to expect that the “hits will keep on coming, which is a speculative view.”
Apple did not return a request for comment.
Perhaps because of its success, the company remains under pressure to come out with more popular products. In its most recent quarter, iPhones represented 56 percent of sales. The number sold rose only 1 percent compared with a year earlier, but the money coming in from iPhones rose 20 percent to $29.9 billion, boosted by the expensive iPhone X, which starts at $999 and began selling in November.
Despite the high stock price — shares closed Thursday at $207.39, up about 3 percent — some analysts remain bullish. After the company brought cash it had held overseas back into the United States, prodded by President Trump’s more lenient corporate tax policies, it began buying back more of its shares, a move that could help keep the stock price stable, analysts said.
CEO Tim Cook, who took over the company shortly before Jobs’ death in 2011, said in a call with investors on Tuesday that he sees the market for smartphones as remaining “really healthy.” He said the iPhone X shows that when the company delivers innovative products, the smartphone category “can be a really good business.”
Apple is also continuing to invest in areas such as augmented reality and original video content, which could play a larger role in its business. Some analysts are bullish about Apple’s efforts to woo more subscribers to its services, because Apple customers tend to spend more money on apps than those who own Android smartphones.
“It’s a monumental metric to pass a trillion,” said Daniel Ives, head of technology research for GBH Insights. “It just speaks to the consumer empire that Jobs, Cook and Cupertino have built.”
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