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Cook still bullish on iPad despite softening demand
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MacNN Staff
Join Date: Jul 2012
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Apple's iPad tablet is continuing to see growing declines in sales, as noted in the most recent quarterly results. As expected, the iPad dropped 18 percent year-over-year in sales, though new models and the holiday season provided a substantial boost from the previous quarter. Although Apple only sold 21.4 million iPads this holiday season compared to 26 million last year, sales were up strongly from the previous quarter, leaping from September's 12.3 million iPads.
In part this was due to the normal boost from holiday gift-giving, and in part this was due to the introduction of new models in mid-October. This does not obscure the larger issue, however, which is that sales of the iPad are continuing to fall, now accounting for just over a fourth as many units as Apple sells of iPhones in a given quarter. Revenues and the average selling price are also down year-over-year, by 22 percent, and Apple built inventory of iPads in the quarter, so end-user sales were closer to just 20.3 million units.
Apple CEO Tim Cook was asked about the disappointing iPad sales, but said he is still very bullish on the tablet. The biggest factor in his rationale was the incredibly high customer satisfaction rates and real-world usage rates. CFO Luca Maestri earlier cited a Changewave report in November that noted a 98 percent satisfaction rate, and also reported that 60 percent of future tablet buyers planned to get an iPad -- a figure that rose to 78 percent when asking just business and enterprise buyers.
He also mentioned that 70 percent of global tablet use on the Internet comes from iPads, providing a strong real-world usage metric that would seem to contradict shipment-based reports of softening market share in the tablet arena. Cook elaborated on those stats when discussing the reason for his optimism that the iPad will continue to flourish.
While reiterating that he sees no short-term turnaround, the boost provided by the highly-regarded new models -- of which reviews were so impressive that they even won over hard-core Android fan site recommendations -- is likely to continue into the current quarter. "I am still very optimistic and bullish on the iPad," Cook said.
"In the short run -- in these 90-day clips we use -- I don't think you're going to see a miraculous change in the year-over-year, but ... I see that the first-time buyer rates are very high. If you look in some of the developed markets, like the US, Japan, the UK ... you would find that 50 percent are buying for the first time. If you look in China, it's over 70 percent. So when you have that kind of first-time buyer rate, you don't have a saturated market."
As usual, Cook went on to note the incredibly-high customer satisfaction rate, noting that some surveys had pegged the iPad as have rates as high as 100 percent -- an unheard-of accomplishment. "When I look at the usage," he said, "the usage [rate] is six times that of [Samsung], our nearest competitor. Over 80 percent of the e-commerce on tablets is on iPad. So I believe that over the long arc of time, that the iPad is still a great business."
Cook also noted that the company is still figuring out what the average life-cycle is for iPad owners, expressing an opinion -- not yet validated by research, he noted -- that it seems to fall between the typical two-year replacement cycle of an iPhone and the five-year cycle of a typical Mac home computer. In addition, Cook hinted that the future pipeline -- though, he reiterated, not in the near future -- for the product is good. As the next iPad refresh isn't expected for another nine months, the remark could be a hint that the next version will offer some substantive changes.
Addressing the sales drop directly, he mentioned not just the longer replacement cycle, but also admitted that there's "probably some level of cannibalization that's going on with the Mac on the one side and the [now larger-screen] iPhone on the other ... but it's hard to tell exactly how much [impact it has overall]. On the other side, I think the partnership with IBM and the work that we have going on in the enterprise [sector] is profound, I think we're really going to change the way people work." He added that Apple and IBM plan to bring out 12 more vertical-market apps soon, some entering into new business categories, and that the company is on track for a total of 100 such apps by the end of the year.
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Dedicated MacNNer
Join Date: May 2001
Location: Chicago, IL
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hmm how about because tablets are just toys...I have a MacBook and a iPhone...I don't need to shell out an extra 800 for an additional toy that doesn't help me.
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Mac Elite
Join Date: Aug 2001
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Your iPad might be a toy, mine isn't. I use it mostly for email, dictation, reading, writing (with my keyboard case), photo editing, travel planning, Siri stuff like making reservations for dinner or finding out what movie is playing, watching BBC iPlayer, taking notes, managing my stocks, and watching old movies. Basically, anything where I don't want to sit at a desk, I mostly do on the iPad.
Neither did it cost me $800, though perhaps you are outside North America and writing about your own currency rather than dollars.
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Charles Martin
MacNN Editor
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I've got a 2009 Mac Pro tower, MacBook Pro, AppleTV, iPhone 6, and I own a significant amount of AAPL (sadly, not enough yet to retire on) that I bought cheeeeap 14 years ago. So, I'm an Apple fan. I still do not own an iPad and likely will not anytime in the near future, even if the wife and I were to go in 50/50 on it. We just can't justify the nearly $1000 price tag once you factor in sales tax, the cover, AppleCare, and the device itself.
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Senior User
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I agree with techweenie1. I use my iPad all the time, but to me it's a luxury device and will never be a productive laptop replacement. And I cannot justify the cost of replacing it anytime soon, even if something happened to it.
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Grizzled Veteran
Join Date: Jul 2006
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Other than offering more screens sizes and its usual silliness about making iPads a fraction of an inch thinner, Apple's hasn't been added significant new features to its tablets. For instance, non-cellular iPads could get GPS for location-aware apps and driving instructions. Not everyone wants a monthly cellular contract on top of all their other bills.
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Author of Untangling Tolkien and Chesterton on War and Peace
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Grizzled Veteran
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How in the world would a non-cellular iPad load the map data to display on the screen while you're driving? It would be virtually useless for the iPad to be aware of and track your current latitude and longitude if it couldn't display that information to you in a useful way (e.g., atop a map).
No network connection = no maps, as long as you still want to retain any sort of detail at any given zoom level. Expecting detailed maps to be pre-loaded onto a device would only send people into more of a tizzy over storage space, as the space needed to store map data is prohibitively large.
GPS in the wi-fi only models would be "nifty," but difficult to make useful to the user without some kind of network connection to fetch, process, and display map information.
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Grizzled Veteran
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The one use-case I can imagine would revolve around some of the apps available in the app store where you can pre-load a very limited set of map data (for example, the highway network between you and your destination), but it hardly seems feasible for Apple to include a GPS module in the wi-fi only iPad models specifically for a handful of apps.
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Senior User
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How do you think Garmin devices function? There are plenty of "offline" map applications in the app store. In fact, they like to nickel-and-dime you by having to pay for individual cities/geographical area data as in-app purchases. But anyway, they're out there. I like the idea of a GPS iPad that is non-cellular....
An interesting thing that I've noticed while using offline map apps is that location services seems to still function (with wifi enabled) even if you haven't joined an access point.
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Grizzled Veteran
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How do I think Garmin devices function? By pre-loading hundreds of megabytes or even gigabytes of map data into their on-board memory at the factory. A Garmin is not a multi-function tablet device capable of running multiple, different apps, all of varying sizes, and with dynamic network-based content where the user would want to be mindful of the amount of space used on the device.
Not to mention -- how large are these offline navigation apps? 150MB, or 1.5GB? Do any of them allow you to selectively retain only the data for your immediate city or county in the iPad's storage?
Still, I think it a bit infeasible for Apple to include GPS capabilities in a device that doesn't have the ability to contact a network to download mapping data, and for Apple to include GPS capabilities in a device to satisfy the usage of only a subset of mapping apps (those that can handle offline mapping capabilities within a reasonable amount of storage space).
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Senior User
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The Twin Cities map download for my Ulmon app is 16mb, while the local article data (restaurants, hotels, etc) is about 18mb.
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