What's the Matter With Apple's iPad Business?

The thing about being consistently amazing is that people notice when you cease to be amazing.

Apple's iPad was amazing on several levels when first introduced. It was dismissed as a toy - and then took off, effectively serving as the digital nail in the laptop's coffin.

Buyers love the size, the convenience and all that signature Apple fairy dust: design, quality and graphics yada yada yada.

Adults scooped them up like so much candy and, even better, kids love them, too. What better platform on which to watch your favorite cartoons, sketch and play.

But a funny thing happened on the way to immortality: sales have slowed. Competition is partly responsible, though as the following article explains, there may have been some strategic missteps in the initial roll-out. The breadth of the children's market may have been underestimated, upgrades have been few and far between and, for what it is, pricing may have sucked the life out of the market prematurely.

All of which is to say that this business of keeping the world amazed is hard work. JL

Jay Yarow reports in Slate:

The iPad is the best tablet for surfing the Web, using apps, and getting stuff done. Except for, you know, working and creating content.

While most people like to focus on the iPhone when it comes to Apple, it’s the iPad that’s perhaps the more intriguing story.

Philip Elmer DeWitt has gathered analysts’ predictions for the iPad for the March quarter, and the consensus sees Apple selling 19.33 million iPads. If accurate, that’s a 0.7 percent drop on a year-over-year basis. 

The iPad was supposed to be the second strong leg of Apple’s business. It’s definitely a solid business that nearly any company would want, but it has seen a startling decline in its growth rate at an earlier-than-expected stage in its life cycle. 

Why has the iPad hit a wall? We’re not sure. Hopefully, an analyst asks Tim Cook about it on the earnings call and he gives a good, insightful answer. Last quarter he was asked about it, but brushed off the question. 

If we had to guess, we’d say it’s a mix of things.

Pricing: When the iPad was released, it cost $500, and Apple’s rivals couldn’t compete with that number. Then, very quickly, they figured out how to lower their prices. Amazon was the first to really get aggressive on price. It sold a 7-inch Kindle Fire for $199 in 2011. That Fire is now $119. (It also offers an 8.9-inch Kindle Fire for $339.) 

Usage: The iPad is the best tablet for surfing the Web, using apps, and getting stuff done. But the other, cheaper tablets are good enough for all that stuff. For what a tablet does, the low-cost tablets are fine. 

Life cycle: Unlike the iPhone, the iPad doesn’t seem to be upgraded every two years. As a result, sales growth is going to be weaker.

Too much, too soon: The iPad sold in giant volumes early in its life. That’s created tough sales comparisons, and too much hype for the future of the product.