Apple's iPad Sales Boom Ends

Apple tablets must evolve to compete with phones among low-income consumers.

People look at Apple products at one of the company's stores in Paris, on Dec. 20, 2013.

Sales of the iPad reportedly dropped 2.29 percent in the second quarter of this year compared to the same quarter in 2013.

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Apple’s quarterly earnings report on Wednesday will likely show sales of iPad have hit a wall and have even declined compared with 2013. Analysts predict the company will have to make the device more desirable to appeal to more than just high-income consumers.

Sales of the iPad increased or held steady each quarter since the late Apple CEO Steve Jobs introduced the device in 2010, but during the second quarter this year sales declined 2.29 percent compared with the same quarter in 2013, according to an estimate from the Braeburn Group, a research firm focused on Apple analysis. In the March quarter of 2013, iPad unit sales rose 65.09 percent, the estimate said.

As of mid-2013 approximately 40 percent of U.S. households owned a tablet, according to market research firm Gartner Inc. Apple’s share of that market declined from 62.3 percent in 2012 to 51 percent in 2013 as competing tablets emerged from companies including Amazon and Microsoft, according to Gartner.  

Part of this decline is because the early adopters of iPads were high-income consumers, and with that demographic already saturated, Apple is having trouble selling to consumers that won’t spend money on a tablet if they already have a smartphone, says Mikako Kitagawa, a tablet research analyst at Gartner.

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Competitive pricing among tablets is also a factor, as Amazon’s Kindle Fire HD starts at $129, compared with Apple's iPad Mini priced at $299, for example.

“The late adopters don’t need to spend as much since there are alternatives,” Kitagawa says. “Consumers put the most priority on their smartphones.”

This lag in iPad sales also implies that smartphones may be sophisticated enough to be a mobile substitute for computers rather than tablets, according to a tweet from Benedict Evans, a partner at Andreessen Horowitz venture capital firm.

The iPad represents about 20 percent of Apple’s revenue, so the company will have to upgrade the device to make it easier for consumers to use the tablet to replicate chores they would usually complete on a PC, including creating a composite document that combines graphics, spreadsheets, rich text and hyperlinks, said a blog post from Jean-Louis Gassée, who was an executive at Apple from 1981 to 1990.

“I see the lull in iPad sales as a coming down to reality after unrealistic expectations, a realization that iPads aren’t as ready to replace PCs as many initially hoped,” Gassée said.

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Microsoft has also so far failed to gain traction with consumers through its Surface tablets that include a detachable keyboard, he said.

“Customers didn’t like the dueling interfaces, nor the introduction of layers of complexity where simplicity had been promised,” Gassée said.

Upgrading iOS to make the system more convenient for PC tasks may also help sales of the iPad, but Google’s Android operating system is the most widely-used on tablets, boosting sales of Samsung Galaxy tablets that use the system.

Windows will occupy 10.2 percent of the tablet market by 2017, growing from a projected market share of 3 percent this year, according to data from the International Data Corporation market research firm. Android, however, will still dominate the lion's share of the tablet market in 2017, although its presence is projected to dip to 58.8 percent, compared to the projected market share of 60.8 for 2013. Apple's iOS will occupy 30.6 percent of the tablet market in 2017, compared with 35 percent in 2013, according to IDC.