iPad at 5—alive and well

iPad_taking_rootsApple recently released its financial results, marking another stellar quarter.

The world’s most valuable company announced $58 billion in revenue and $13.5 billion in profits for fiscal Q2-15, and now has $194 billion in cash and securities in its war chest.

If you’ve been following the company as long as I have, however, you know that someone, somewhere will be dissatisfied with something.

To hear the anguished cries of some analysts, you’d think the sky was falling. For example, the iPad.

iPad sales decline

Indeed, a graph of iPad sales does show a gradual decline in sales over the last few years. (Note that 2015 in the chart is estimated over four quarters.)

iPad_sales

It’s important to consider a few facts, however, when you look at what’s going on here.

First, when the iPad was released, it became Apple’s fastest selling product, despite a fair number of negative reviews. Over the first four years, iPad sales grew dramatically. Then sales leveled off and began to decline. And that decline, year over year, has continued.

In its most recent quarter, Apple sold only 12.6 million iPads. Doesn’t that make you sad for poor Apple? Seriously, though, that maps out to a $24 billion per year business. Most companies would give their first-born CEOs for those results.

Nonetheless, it’s worth taking a look at the reasons why the iPad is not selling near its peak quarterly rate. Why are sales declining?

There are several reasons.

Built like tanks

First, iPads are made extremely well. They last. For many folks who have a perfectly functional first or second generation iPad, there’s no compelling reason to upgrade.tank

Personally, I held out purchasing an iPad until the third generation, which offered the first Retina display. The display was stunning, and that version also had a faster processor.

I kept the third-generation iPad for a year or so, and it never failed me. If I had one complaint, it was kind of heavy. When I held it with only one hand, my arm got tired after just a minute or so. Terribly sad, I know.

In 2013, Apple released the iPad Air, and reduced the weight of the iPad significantly. I sold my third-generation iPad on eBay for almost $300 and bought the new one. But I didn’t really need to sell the old iPad…I wanted to. I’m sure the old one is still going strong.

Cannibalization

Apple has always taken the approach that they were going to build great products, and if a new product cannibalized an existing one, so be it. Better Apple than another company. Clearly Apple has released products that are impacting iPad sales.

iphone-cannibalFirst are the MacBook Air models. These laptops are extremely lightweight and offer the full functionality of Mac OS X.

For many customers trying to maximize their dollar for computing power, the MacBook Air makes more sense than an iPad. And, if they already have an iPhone or other smartphone, the iPad would seem like an unnecessary luxury item.

Second, Apple last year released the larger-screen iPhone 6 and iPhone 6 Plus. From what I’ve read, many iPhone 6 Plus adopters are finding that they no longer use their iPads and iPad Minis as much.

The iPhone 6 Plus has a 5.5-inch Retina screen, and offers many of the capabilities of a tablet. So, if you’re only going to pay for one mobile device, the iPhone 6 Plus is the ticket.

Last quarter, Apple sold over 61 million iPhones. Clearly, the larger screens have been extremely popular, particularly in China and other developing countries.

Functionality

The iPad sits in the nether region between smartphone and laptop. Its larger screen offers the potential for productivity applications that users would be less likely to run on smartphones.productivity

Microsoft Office, photo and graphics apps, authoring, and other productivity apps work quite nicely on an iPad. If you’re interested, check out the post on the iPad that I wrote last year on iPad productivity.

However, smartphones are capable anywhere there’s a cellular connection. They’re lighter weight and more mobile.

For users who can leave home with only one device, they’re going to opt for their smartphone.

Conversely, for many users who need heavier duty computing on the road, they’re going to opt to bring their laptop along instead of the iPad.

With many users attempting to stretch their computing dollar, there are numerous reasons to make the iPad the odd device out.

On the other hand

Apple is on track to sell over 50 million iPads in fiscal 2015. So, clearly, there’s still a very vibrant market for the leading tablet.

marketAt the quarterly conference call on April 27, Tim Cook pointed out that the Apple-IBM alliance to create enterprise-class apps for the iPad is in its early stages.

Clearly, an important future for the iPad is in vertical market sales—enterprises, hospitals, retail, education, and so on.

There are rumors of a 12-inch iPad on the horizon, as well. Might larger iPads provide functionality that the current iPad Air and iPad Mini cannot—or at least cannot do as well?

Might larger iPads, for example, support Mac OS X? If so, Microsoft should be quaking in its boots with respect to its Surface sales.

Tablets, with iPads in front, have forged a legitimate locus on the computing spectrum, and clearly there’s still a lot of headroom.

The used market

If you are one of the 5 billion people on the planet who don’t yet own a tablet—but you’ve thought about owning one—consider the used market. popular-on-ebay

A quick check on eBay finds a multitude of possible bargains.

If I were in the used market, I would definitely be looking for a first-generation iPad Air.

The iPad Air 2, which I now own, is a great tablet in every respect. But it did not improve greatly on the first-gen Air, and it would likely be quite a bit more expensive on the used market.

And, like I said, iPads are built like tanks. Even a used one would likely last a long time. Happy hunting.

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