Has the Apple iPad Lost its Magic?

by Istvan Fekete on April 25, 2014

Some say it’s magic, others believe it was only great marketing, but they all agree that the iPad has created a new product category that became successful from the very first moment. But the magical tablet may be losing some of its magic.

Apple has closed the second fiscal quarter with great numbers: an amazing 43.7 million iPhones sold, and better than expected profits, revenue, and margins. And let’s not forget that analysts expected only 38.2 million iPhones (the average estimate by professional analysts as mentioned by Fortune’s Philip Elmer-DeWitt).

Furthermore, Mac sales rose 5% despite the overall PC market struggling. In other words, Apple’s second quarter was a success in every aspect. Well, almost every aspect.

There was something that captured the attention of many: iPad sales. Apple failed to meet analyst’s expectations of 19 million units, as it has sold only 16.4 million iPads, which compares to the 19.5 million units sold a year earlier. The iPad represents the second-biggest revenue stream for the Apple business.

In fact, the majority of tablet manufacturers would be happy to post such sales numbers, but the picture looks different with Apple: when Steve Jobs introduced the iPad in 2010, he called it a “magical device”, and the product lived up to that name, inventing the market for tablets.

But as the quarterly earnings number shows, the magic isn’t as strong as it was. Not anymore. iPad sales have been erratic over the past several quarters amid tougher competition and market saturation. Apple’s biggest period was reported in January after gathering the holiday quarter sales: 26 million iPads sold in just three months.

Speaking to analysts on the earnings call this week, Apple CEO Tim Cook attributed the shortfall to changes in the number of devices held in channel inventory, highlighting that Apple has met its internal estimates for iPad sales. But still, we are talking about a 3% drop in iPad sales, and analysts believe this is alarming.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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