The iPad's expected ebb, and the search for why

An anticipated downturn in iPad sales has analysts and pundits asking questions

Apple is expected on Wednesday to confirm Wall Street's fears, that iPad sales growth not only slackened in the March quarter, but reversed course with fewer of the iconic tablets sold than the year before.

The company may have a surprise up its sleeve - t wouldn't be the first time - but the expectation of slowing sales has put observers, pundits and analysts on a quest for why. Why has the formerly hot-hot-hot iPad cooled off?

Some see a failure of the promise Apple implied - or perhaps it was just customers' interpretations - that the iPad and its app inventory could replace a traditional personal computer for many of the most popular tasks.

"I see the lull in iPad sales as a coming down to reality after unrealistic expectations, a realsation that iPads aren't as ready to replace PCs as many initially hoped," Jean-Louis Gasse, a former Apple executive, wrote Sunday in his widely-read Monday Note blog. "The iPad is a tease. Its meteoric debut raised expectations that it can't currently meet."

By Wall Street's consensus, the downturn will be minor: 19.4 million iPads, or less than 1 per cent off the same quarter in 2013. That will be a small decrease compared to the sole previous contraction, in the June quarter of last year, when sales were down 14 per cent from the year before.

Even so, analysts are analysing, as is their wont, and calling an ebbing of the iPad.

Some, for example, see the root of the retreat in the seasonality of sales. When Apple launches a new product, it sells boatloads in the immediate quarter of an introduction, but then watches sales slow after the initial appetite is sated.

"I think a decline in iPad sales is certainly possible, if not likely," said Sameer Singh, an analyst who covers technology -- primarily mobile -- at Tech-Thoughts, in an email reply to questions Monday. "The cyclicality of iOS products typically increases as the product line matures. With the iPhone, we've already seen sales concentrate around product launches with steeper sequential declines. I think we may see more of this with the iPad as well."

Apple rolled out its newest iPads, the 9.7-inch iPad Air and the 7.9-inch Retina-equipped iPad Mini, last October, in 2013's fourth quarter. It sold a record 26 million in those three months, 14 per cent more than in the same stretch the year prior.

There has been, as Singh put it, a cyclicality to iPad sales, including the June 2013 quarter when numbers shrank by 14 per cent. At the time, Apple tried to soften the downturn by pointing out that the same period in 2012 had seen the launch of new iPad models -- the third-generation, the first with Retina -- but that the corresponding one the next year had not included a launch. Instead, Apple shifted iPad debuts last year to the fall.

Ben Bajarin, an analyst at Creative Strategies, also noted, to use Singh's word, a "cyclicality" in consumer electronics, the iPad included, in the fourth quarter of the year. That's when sales, especially in the US, boom because of the holidays.

iPad sales growth has slowed significantly in the last year, even as Apple has set new records. But Wall Street always wants more. (Data: Apple.)

But he also had another explanation for the "why" that painted the situation with a bigger brush.

The reason for the iPad's current troubles, if that's the word, lies in its immediate past, Bajarin argued, when sales exploded in 2011 with year-over-year growth rates in triple digits. That growth, clearly unsustainable, was due as much to external factors as to the iPad itself.

"A perfect storm happened in the PC industry," said Bajarin. "The iPad came out right as a refresh cycle hit, but with the iPad, people became aware they didn't need to refresh [their aged PCs]." Instead, they discovered they could spend the money on a new device, the iPad, that promised simplicity.

"And this Windows 8 debacle hit around the same time," said Bajarin, referring to the cold reception that greeted Microsoft's newest OS in 2012.

The one-two punch put the iPad on the road to impressive sales. "Something exists between the personal computer and the smartphone, and Apple created a computer that in essence meets consumers where they are," Bajarin said. "A PC is overkill for my grandma, for my wife. They've said they don't just want an iPhone but they also don't want a Mac."

Gasse talked about that tweener spot for the iPad as well, and referred to former Apple CEO Steve Jobs' comment at the tablet's introduction that the new device would have to "find its place between the iPhone and the Mac."

But where Gasse argued that the iPad, to continue to grow, needed to grow in functionality -- he seemed to imply that for it to further cannibalize PCs it had to become more PC-like, a "Surface-ization" of sorts -- Bajarin was bullish on the tablet as it was and is.

"The idea of the iPad is that something exists between the phone and the PC," Bajarin said. "In reality, I think we're seeing that take shape. But people are trying to figure out what that means. It's not a device that's always with you, but it's also not a super heavy personal computer."

Saying he was "extremely optimistic" about the long-term prospects of the iPad, especially in its larger sizes, Bajarin conceded that there are many aspects of tablets that had yet to solidify, including how they would become the next computing platform, the successor to the traditional personal computer. But he contended that the current slowdown is natural. "When we see the dust settle, tablet [growth] may slow in many of the same ways that PCs have -- become a trickling growth," Bajarin said.

The key will be how emerging markets - those outside the US, western Europe, Japan and others - take to tablets, and what consumers in those markets decide to do with them.

"Tablets are still coming into their own" in emerging markets, Bajarin asserted. People there will, at some point, decide that they want to do more than what their smartphone can provide. "The phone will have exhausted all it can do, and people will want more," he said.

And that more will come from tablets, not personal computers.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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