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Slumping iPad sales a 'speed bump,' according to Cook

updated 05:04 pm EDT, Tue August 26, 2014

Every category being hit, CEO says

Flattening iPad sales during the last two quarters are nothing to worry about, says Apple CEO Tim Cook in a new interview. "We couldn't be happier with how we've done with the first four years of the iPad," he tells Re/Code's Walt Mossberg. "I'd call what's going on recently a speed bump, and I've seen that in every category."

A leading view behind the slowdown in demand has been that tablets, unlike smartphones, are less tied to a rigid upgrade cycle, freeing consumers to treat them much more like mobile computers - and endowing them with similarly longer active life times, closer to the 3-5 years consumers typically hold onto desktops and notebooks compared to the bi-annual contract-based upgrading of smartphones.

Apple is the only manufacturer who continues to do well with tablets: Samsung has reported "sluggish" sales, and Microsoft's Surface has failed to find a significant niche. Mossberg notes that even with slighly-declining sales, the iPad contributed $6 billion in revenue last quarter - more than the combined earnings of several major social and tech companies.

Supporting this school of thought is the fact that the tablet market as a whole has slowed down, particularly for other manufacturers beyond Apple. Many factors could be to blame, including relaxed demand for upgrades, and the growing size and power of smartphones. Apple itself is believed to be preparing a 5.5-inch iPhone, something that might accomplish many of the same things as an iPad while being more versatile.

On the other hand, Cook may be right to be optimistic of a turnaround: of the seven models of iPad Apple have created since 2010, only one -- the original iPad -- has thus far been made obsolete by technology changes. When iOS 8 arrives, the iPad 2 -- which was sold for a total of three product cycles -- will join that list, potentially prompting widespread upgrading.

Earlier today, sources told Bloomberg that a 12.9-inch iPad will start production by Q1 2015. That could be an attempt to revitalize the iPad lineup by offering a more "professional" option and further distinguishing it from smartphones.

Mossberg also points out that tablet sales overall, led predominately by the iPad, have grown faster than PCs ever did -- even in the 90s consumer explosion of buying where it first became standard for every household to have one, or in recent years with the shift to portables. Cook says he continues to be pleased with the iPad, saying the company "couldn't be happier with how we've done with the first four years," despite the recent flattening of quarterly sales. Thus far, Apple has sold about 225 million iPads -- half of all the tablets that have ever been sold worldwide, and done in just four years.

This theory that tablets have roughly double the active lifespan of your typical smartphone bodes well for Cook's prediction that sales on the iPad will pick up soon. An improved "iPad Air 2," widely expected to debut no later than early October, could entice owners of some of the earliest iPads to finally upgrade, and a second Retina iPad Mini would be an attractive option for those who prefer the smaller screen size. Both are also continuing to attract new customers, both among the public as well as from corporations, schools, and other institutions.

The trend towards larger smartphones may also be affecting tablet sales, particularly on the Android side of the equation -- where tablets have not done nearly as well as smartphones. Samsung has recently reported that its tablet sales are "sluggish," while Microsoft more famously has failed to make a go of its well-publicized Surface line. Apple is the only manufacturer outside some low-end Chinese models that does well in tablets, and consequently takes up the bulk of all the profits made in that area.

Mossberg notes his own use of the iPad, saying that he wants "to check business or personal email, respond to a message, browse the Web, check the news or watch a video, I find it quicker and more satisfying to do on a slender iPad Air than even on the best laptop on the market, the MacBook Air. Of course, I do some of these things on my laptop, some of the time, and some on my smartphones, as well. The laptop's roomy keyboard and multiple windows are a big plus over the iPad. But the laptop weighs three times as much to carry, and is much less convenient on airplanes."

"How you feel about the modern, multitouch tablet depends a lot on what you think Steve Jobs and company set out to do with the iPad back in 2010," he writes. "If you believe he was out to make a bigger smartphone, or to entirely replace the Mac and PC, you're wrong. I believed then, and now, that the success of the iPad depended not on whether it would wholly replace the laptop, but on whether it could be the best, or most convenient, computer in enough common scenarios for which the laptop (and, to a lesser extent, the smartphone) had been the go-to choice."

Cook has said publicly that there remains a great deal of growth in the tablet space to emerging markets and in corporate markets, pointing to a recent partnership with IBM to underscore the latter point. Keyboard cases for the iPad and other tablets -- one accessory that Apple itself doesn't yet make -- have also bolstered the devices' reputation as genuine productivity machines, and could help Apple fend off the recent emergence of Chromebooks and other low-end ultrabooks as a threat to the educational dominance of the iPad.

The next generation of iPads might well prove a test for the company's commitment to the tablet, but it seems clear that many other companies will be backing away from the form factor without a shift in innovation that would make their products stand out and sell better. Cook has said that he thinks that the key to greater iPad growth will come through continued innovation, hinting that the company has some ideas in store for future models. Given the strong initial growth of tablets and their versatility -- which has fostered strong adoption of the devices among seniors, kids, road warriors, enterprise and institutions -- the current flat sales could just be the calm before a second storm.

by MacNN Staff




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