I know that there's a lot of negative commentary in the markets on this, but I have a little different perspective on it…. Instead of looking at this thing each 90 days, if you back up and look at it, we've sold 237 million in just over four years. That's about twice the number of iPhones we sold over the first four years of iPhone….
To me, I view it as a speed bump, not as a [… long pause …] huge issue. That said, we want to grow. We don't like negative numbers… Looking further in the data, I know that there's a popular view that the market is saturated. But we don't see that. I do look at our data deeply.
iPad Air 2. Image Credit: Apple
Mr. Cook cited the latest market research data he had from the June quarter.
In the top six [iPad] revenue countries, the country that sold the lowest percentage of iPads to people had never bought an iPad before, that number is 50 percent. And the range goes from 50 to over 70 [percent]. So when I look at first time buyer rates in that area… that's not a saturated market.
What you do see is that people hold onto their iPad longer than they do a phone. And because we've only been in this business four years, we don't really know what the upgrade cycle will be for people. And so that's a difficult thing to call….
I see catalysts going forward. There are obvious cannibalizations things that are occurring…. I'm fine with that. But over the long arc of time, my own judgment is that iPad has a great future. How the individual 90 day [sales] work out, I don't know. But I'm very bullish on where we can take iPad over time, and so we're continuing to invest in the product pipeline.
The most important thing to learn here is that Apple's Tim Cook looks at the iPad sales data closely. He sizes up the situation, and as much as he can in public, explains what he thinks is going on. Internal decisions will be affected. That's a far cry from a simpleton response: “The iPad is dead.”
Some Observations
- Apple probably has a better handle on the upgrade cycle than Mr. Cook admitted. New, compelling features get customers to upgrade. Mr. Cook glossed over that, especially with respect to the iPad mini 3.
- A new, larger size iPad could give people a reason to upgrade.
- The percentage of customers with an iPad 2,3,4 is substantial, and the sales of iPad Air 2 can be expected to account for substantial sales over the next four quarters.
- Mr. Cook is right about the longterm prospects of the iPad, but the record setting sales of the Mac this quarter will likely prevent any kind of 2-in-1 design. Mr Cook also said, “The back to school season voted; the Mac won.” And so, I look for more aggressive development of the iPad, not a toaster-fridge.
- The current iPad upgrade cycle is based on a lot of factors. The economy. The current iPad/iPad mini mix. Hand-me-down notions. The popularity of the iPhone 6 Plus phablet. The breaking-in of Apple Pay on the Internet. The leaks about new iPads causing a stall in sales. In the end, as Mr. Cook said early in the earnings call, “We're selling everything we make.” The fact is, product line mixtures have an ebb and flow.
There will be some people who want the iPad to fail and will grasp at any straw to support that thesis. But with Apple reporting stunning revenues, the specifics of the product mix don't look like game changing prospects for analysis. If anything, however, this all may just give the iPad technology a renewed push, and then the numbers for the product mix could very well swing back.
The real question to ask is whether Apple shoppers are delighted with what Apple is offering now. The overall sales numbers say they are.