Tim Cook highlights iPad's key role in Apple ecosystem as investors shrug
In response to sliding iPad sales, investors on Wall Street have shown little interest in the market leading tablet. Apple Chief Executive Tim Cook took offense to that this week.
"Nobody is asking about iPad on the call," Cook said during his company's quarterly earnings conference call on Tuesday.
Investors likely aren't interested in discussing the iPad because it's not driving growth for Apple: Sales of the iPad were down 20 percent year over year to 9.8 million tablets, accounting for $4.3 billion in revenue. In contrast, Mac sales reached a record 5.7 million units and $6.9 billion in revenue.
Still, Cook believes that the iPad plays a very important role in Apple's ecosystem, informing investors that the device attracts a huge number of first-time Apple customers, particularly in emerging markets.
For example, Cook said that in China, a whopping 40 percent of those who bought an iPad had never owned any Apple product before. In addition, for 68 percent of iPad buyers in China, it was their first tablet.
Apple frequently boasts about how "sticky" its platform is, with customers not only staying with the company's hardware for future upgrades, but also buying into other Apple devices like the iPhone and Mac. This is bolstered by services such as the App Store, iCloud, iTunes, Apple Music and more, which keep customers "locked in" --?and happily so.
Apple Chief Financial Officer Luca Maestri cited statistics on Tuesday from ChangeWave that showed a 97 percent customer satisfaction rate for the iPad Air 2. In addition, corporate buyers have a 95 percent satisfaction rate with the iPad.
The iPad also dominates in terms of both purchase intent and existing usage. Maestri also cited data indicating that the iPad has a 73 percent share in the U.S. market for tablets priced above $200.
Apple will also expand its premium iPad lineup next month with the debut of the iPad Pro, and company officials said Tuesday they hope the larger 12.9-inch model will appeal to business customers. Maestri cited a potential iPad Pro use case in a new Bloomberg professional app, which will allow more than 325,000 financial professionals to gain access to market data and trading tools.
With so many iPads in use already, one possible reason for the sales decline is a longer upgrade cycle --?customers and companies alike treat their iPad more like a PC and less like a smartphone, keeping the device for a longer period of time before opting to upgrade. It's also likely that growing Mac sales, and the popularity of larger-screened iPhones, have been cannibalizing the iPad.
None of those factors were mentioned in Tuesday's call, however. Maybe because, as Cook noted, nobody asked.
"Nobody is asking about iPad on the call," Cook said during his company's quarterly earnings conference call on Tuesday.
The iPad is attracting a large share of new customers to the Apple ecosystem, particularly in emerging markets.
Investors likely aren't interested in discussing the iPad because it's not driving growth for Apple: Sales of the iPad were down 20 percent year over year to 9.8 million tablets, accounting for $4.3 billion in revenue. In contrast, Mac sales reached a record 5.7 million units and $6.9 billion in revenue.
Still, Cook believes that the iPad plays a very important role in Apple's ecosystem, informing investors that the device attracts a huge number of first-time Apple customers, particularly in emerging markets.
For example, Cook said that in China, a whopping 40 percent of those who bought an iPad had never owned any Apple product before. In addition, for 68 percent of iPad buyers in China, it was their first tablet.
Apple frequently boasts about how "sticky" its platform is, with customers not only staying with the company's hardware for future upgrades, but also buying into other Apple devices like the iPhone and Mac. This is bolstered by services such as the App Store, iCloud, iTunes, Apple Music and more, which keep customers "locked in" --?and happily so.
Apple Chief Financial Officer Luca Maestri cited statistics on Tuesday from ChangeWave that showed a 97 percent customer satisfaction rate for the iPad Air 2. In addition, corporate buyers have a 95 percent satisfaction rate with the iPad.
The iPad also dominates in terms of both purchase intent and existing usage. Maestri also cited data indicating that the iPad has a 73 percent share in the U.S. market for tablets priced above $200.
Apple will also expand its premium iPad lineup next month with the debut of the iPad Pro, and company officials said Tuesday they hope the larger 12.9-inch model will appeal to business customers. Maestri cited a potential iPad Pro use case in a new Bloomberg professional app, which will allow more than 325,000 financial professionals to gain access to market data and trading tools.
With so many iPads in use already, one possible reason for the sales decline is a longer upgrade cycle --?customers and companies alike treat their iPad more like a PC and less like a smartphone, keeping the device for a longer period of time before opting to upgrade. It's also likely that growing Mac sales, and the popularity of larger-screened iPhones, have been cannibalizing the iPad.
None of those factors were mentioned in Tuesday's call, however. Maybe because, as Cook noted, nobody asked.
Comments
The long upgrade cycle is another key fact: my wi-fi only iPad is still serving my kids!
The reason sales aren't going up is simple... These devices work and continue to work. We still have about 2% of our app user base on iPad 1 and nearly two thirds on iPad 2. Apple continues to support iOS 9 on the latter which means people are a) satisfied with their purchase b) use it in their daily lives c) don't have a need to upgrade. I'd rather have that because it's a long term customer.
I'm one of those with an iPad 2. The Pro can't come out soon enough for me. Even though iPad 2 can run iOS 9, it doesn't do it well. Please please let the rumours be wrong and have an early November release date!!!
iPads are a lot like Macs.
They don't need to be replaced every year. Or two. Or even three. They continue to work and be useful.
Some folks don't understand this.
Additionally, larger iPhones are naturally cannibalizing some iPad sales.
With Apple, one product grows from and into another. There's some natural overlap that also makes transitioning from one product to the other dead-easy. Love your iPad Mini? No problem. You'll feel right at home on your iPhone 6s Plus. And so on.
Of course it plays a key role. How could a product that sells 40-50 million per year and generates $25 billion in revenue NOT be a key product for your company?
The reason sales aren't going up is simple... These devices work and continue to work. We still have about 2% of our app user base on iPad 1 and nearly two thirds on iPad 2. Apple continues to support iOS 9 on the latter which means people are a) satisfied with their purchase b) use it in their daily lives c) don't have a need to upgrade. I'd rather have that because it's a long term customer.
I agree 100% with this and especially appreciate that this is an insight from a developer who has access to what many assume - that "older" devices are still going strong and are being used. Although I understand analysts' reasoning (growth in unit sales is good), I disagree with the conclusion (iPad is in trouble). To me, any product that people use and love is a success (so long as it is being sold at a profit). And "use and love" are only enhanced if the product has a long useful life. It may mean there are fewer annual sales for a while but it also means customers are not defecting and will come back when they eventually purchase a replacement or new device. And this, in some ways, encapsulates much of what people miss: Apple's success isn't driven by some sort of planned obsolescence. It is driven by customers wanting to use the devices and get the most they can. With iPad, for many users, most of what they want is still satisfied by iPad2. And for many others, was satisfied by the iPad mini. And for them to be satisfied is GREAT. For more on this, see: http://q10a1.blogspot.com/2015/04/tablet-doom-and-gloom.html.
iPads are a lot like Macs.
They don't need to be replaced every year. Or two. Or even three. They continue to work and be useful.
Some folks don't understand this.
Additionally, larger iPhones are naturally cannibalizing some iPad sales.
With Apple, one product grows from and into another. There's some natural overlap that also makes transitioning from one product to the other dead-easy. Love your iPad Mini? No problem. You'll feel right at home on your iPhone 6s Plus. And so on.
Well that’s the rub Wall Street is obsessed over. Wall Street wants turnover, churn, new stuff being sold, growth, incessant growth. The very strengths you point out are considered weaknesses by analysts. Android devices have very little resale value, don’t last as long as iOS devices so there’s constant chucking of the old and buying the new. Not so with Apple as you point out.
iPads are a lot like Macs.
They don't need to be replaced every year. Or two. Or even three. They continue to work and be useful.
Some folks don't understand this.
Additionally, larger iPhones are naturally cannibalizing some iPad sales.
With Apple, one product grows from and into another. There's some natural overlap that also makes transitioning from one product to the other dead-easy. Love your iPad Mini? No problem. You'll feel right at home on your iPhone 6s Plus. And so on.
Macs are a great analogy. We're still using a 2011 iMac and it is still going strong (although I am thinking about upgrading to an SSD which, fortunately, the older iMacs still permit). This user engagement and long-term satisfaction is a plus, not a minus. There would be fewer buyers if people felt like their Macs would not justify their premium by, among other factors, easier use, reliability, build quality and longevity. iPads are very similar. Some current sales are being lost because iPad 2s still work for many people. But more future sales would be lost if people felt iPad 2s become obsolete quickly. Phones are pretty much a necessity so it is easier to justify regular upgrades. iPads are not. So the value proposition becomes much more important to build the right base for the future. For more thoughts on iPad growth, you can see: http://q10a1.blogspot.com/2015/04/tablet-doom-and-gloom.html.
Agree. Plus users who own an iPad are more likely to buy an iPhone/Mac.
My first Apple product since a Mac SE back in college was an iPad2. I didn't get my first iPhone until 2 years later when my company started supporting them and I could finally ditch the BB.
The reason sales aren't going up is simple... These devices work and continue to work. We still have about 2% of our app user base on iPad 1 and nearly two thirds on iPad 2. Apple continues to support iOS 9 on the latter which means people are a) satisfied with their purchase b) use it in their daily lives c) don't have a need to upgrade. I'd rather have that because it's a long term customer.
The iPad2 is sluggish with iOS9. I would buy an "Air3" today if they launched it. If they don't announce a replacement for the Air 2 during the winter, I'll get one of those.
There's a reason iPads are down. They're made so well that no one needs to Upgrade for 4 or 5 years. Unlike the phone that goes 1-2 years max. The iPad still doubles sales of the Mac regardless and will likely show cyclical up and down sales due to its unique nature.
My iPhone 4 I used for over 4 years before replacing it with a iPhone 6. It got a little slower with each major OS upgrade, but it still worked with all the Apps. Did most everything, though not Siri, but saw a lot of new features during it's life. Replacing a phone every year is silly. You should easily get 2 years out of one. MAX is however long you want to continue using it. Even after having that iphone 4 for so long, I still ended up selling it to T-Mobile for $202!!!
In my opinion tablet's market is saturated, just that....
People aren't upgrading iPads every year (nor every other year).
There's a reason iPads are down. They're made so well that no one needs to Upgrade for 4 or 5 years. Unlike the phone that goes 1-2 years max. The iPad still doubles sales of the Mac regardless and will likely show cyclical up and down sales due to its unique nature.
Absolutely, and certainly with the last couple of iterations, the speed of the CPUs is so fast and the OS and apps so well optimised that they perform well much longer than they did at first, though it's great to see some people still using iPad 1 and 2s out there - it if ain't broke, don't fix it. This is one of the greatest aspects of choosing Apple, their stuff is quality (despite what the trolls say) and it lasts and continues performing well. I'm still sporting and using daily a mid-2007 iMac, which is running El Capitan - a machine nearly 10 years old looks as good as they day I brought it home (had it delivered<smile>) and it's still useful and running.
The iPad2 is sluggish with iOS9. I would buy an "Air3" today if they launched it. If they don't announce a replacement for the Air 2 during the winter, I'll get one of those.
Unlike casual tablet users, my Air 2 is a constant companion, both at home and the workplace. I upgraded from an iPad3 last year, and the improvements were dramatic and immediate. For what I use it for, performance comparatively screams. It's so lightweight, I now routinely double-check my satchel to make sure I haven't overlooked it. My only regret is not springing for cellular.
Several associates of mine still use iPad2s. Based on my experiences with them, I would lose patience with the overall experience. If I were you, I'd do myself a favor sooner than later...
The only real hardware gripe about iPads is their abysmal lack of an SD slot, which sticks users with the storage they initially bought. Data-rich apps for iPads tend to be huge thanks to large images. There are about a dozen I'd love to have on my iPad but that are too large to fit.
Apple could also do more to encourage cross-sales. For instance, it should consider letting iPhones share GPS location data with non-GPS iPads via Bluetooth. Then selling an iPad would encourage the adoption of an iPhone and vice-versa. At present, that's the one major gap in an otherwise great shared ecosystem.
I completely agree with you. There would be short term pain with investor panic but long term they'd get over it. With respect to iPads I'm not sure I completely agree with Cook pushing this enterprise angle. In some ways it gives off the false notion that the device has some how failed in the consumer market and so now Apple is desperately trying to juice sales by going after the enterprise. In reality the issue with iPad is it took off so fast and the iPad 2 was so much better than the iPad 1 which drove huge sales growth and then same with retina. Now the growth is declining as those devices are good enough for what they're used for and people don't feel the need to upgrade as frequently. Plus larger screen phones are cannibalizing sales. I'm not sure what Apple does about that long term. I'm not sure turning iPad into a laptop is the right idea.