Apple’s second quarter results were announced today by CEO Tim Cook (Mark Rogowsky has more coverage here on Forbes). As part of the earnings call, Cook talked about the sales and acceptance of the iPad. Sales are lower this quarter than the same period in 2013, with Apple selling 16.3 million iPads compared to last year’s 19.5 million, but before you start thinking about the death of the iPad, there are some mitigating factors to consider.
The main one was highlighted by Tim Cook. By reducing the volume of iPads in the channel inventory, the drop in sell-through was limited to just 3%.
This is classic Tim Cook – reducing the time from the factory to the consumers hands. There is more margin to be made by reducing the time that an iPad is shipped but not sold. That does require an adjustment in the channel, and it makes sense to do it in a quiet quarter, away from the Q4 Christmas sales and Back to School offers in Q3.
Thanks to the two-year contracts offered by most networks, the iPhone is not only a huge seller (after all, the carriers have customers who want to buy the iPhone), but the smartphone also has a built-in obsolescence. When twenty-four months tick over, customers go looking not just for a new deal, but a new smartphone – which is more than likely a new iPhone.
The iPad does not have that advantage. After two years, your average iPad is still in active service. If someone does decide to look for a replacement, the older iPad is more than likely going to be passed on around family and friends in a way that is discouraged by the carriers with an older iPhone. iPads do not have a natural moment in the life cycle that generates an ‘upgrade now’ event.
You also have to look at the tablet market as a whole. Chitika’s look at the North American tablet market is a good place to start. While the headline news is Samsung overtaking Amazon, other indicators point to the dominance of the iPad. NPD reports the iPad share in the US stands at 46%. With 77% of tablet based web traffic coming from iPad devices, Chitika also backs up the assertions of Cook on today’s earnings call that Apple’s focus with the iPad is on penetration alongside the speed of the sales.
Cook stated that the iPad has sold twice as many units as the iPhone has done over a similar period from launch. According to Apple’s figures, 95% of tablets in education are iPads, and 91% of enterprise tablet activations are iPads. As for customer satisfaction, 98% of customers are satisfied.
Add together all the Android tablets out there (remembering that a number of them will be specialist tablets designed for niche roles where the iPad is not suitable) and you still don’t overhaul the iPad in terms of usage, and you’re probably only matching its share when you consider outlying tablets powered by alternatives such as Windows 8 prevent either Android or iOS taking more than 50% of the worldwide market.
In Cook’s own words “…when I look at all of these, I feel great. That doesn’t mean that every quarter is going to be a number that everybody’s thrilled with. But over the arc of time, the iPad has a great future.”
To me these numbers do not suggest that Apple is somehow losing the tablet market. They say Apple is comfortably in command of a tablet market that could be approaching the end of the hyper-inflation period of adoption, and from now on the number of tablet users will continue to grow, but at a slower rate.
Everyone who lusts after a tablet… has one. Everyone who thinks they could us a tablet in their life… probably has one now. With longer replacement cycles and an install base that is not growing as rapidly as the smartphone market, the slowing sales of the iPhone points to a saturating market.
Where’s the hockey stick growth? Not in tablets; not in desktop or laptop PC’s; growth belongs to the smartphone. null , but it’s unlikely to deliver the same stellar sales as the iPhone.