What if Apple is Nokia?

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It’s the current worst fear of Apple shareholders, and perhaps with good reason.  The mobile phone market is littered with the corpses of once dominant handset makers, which all but disappear from existence.  Arguably the reason that Apple trades at an enterprise value with a mid single digit multiple is that investors are already pricing in the idea that the iPhone could suffer the same fate as the Startac, the Nokia 5190, the RAZR and the Blackberry before it.  So what if the nightmare is true? What if $AAPL is $NOK?

As a thought experiment, below is what Apple would look like if 2012 was the peak of its empire and from here on Revenue and EBITDA margin contract at the same rate that they did for Nokia between 2008-2012.  The analysis ignores the fact that AAPL has other product lines than just the iPhone, and these are not my actual projections, just a glimpse into what the nightmare of AAPL shareholders could actually look like.

The numbers imply that over the next three years, Apple could still generate somewhere close to $100B in cash, accumulating ~$250B when combined with today’s horde.  And if the rest of the business traded at 6x EBITDA in 2015, the market cap could be somewhere in the $400B range, similar to where it is today.  For the record, iPhone sales in 2012 were $80B, so that 2017 revenue number (which is $71B below the peak) implies that the iPhone effectively no longer exists as a product in 2017.