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Long replacement cycle drags down iPad sales

Gregg Keizer | July 25, 2014
Tablets aren't in trouble, but slower upgrade tempo causes another decline for Apple.

But the longer-than-expected refresh cycle may have a silver lining for Apple, Dawson said. Because of the iPad's fast initial growth -- much faster, for instance, than for the iPhone, that speed driven by an already-in-place App Store and the smartphone's large installed base -- there are large numbers of iPad owners using a tablet that's more than a year old.

Dawson was convinced that the tablet age bulge represented a large upgrade opportunity for Apple in the next 12 months. "If upgrades continue at a similar rate to what we've seen so far, this bulge in the base should cause a similar bulge in sales over the next year or so, perhaps starting as soon as late Q3," Dawson wrote on his blog.

And there are untapped markets for the iPad, analysts asserted, notably to businesses that buy tablets for their workers, and don't simply adapt tablets owned by employees who bring their devices to work.

Not surprisingly, Apple's CEO spent quite some time on the earnings call talking about the recently announced partnership with IBM, and Apple's opportunity to sell more tablets to businesses as a result.

"[Al]though our market share in the U.S., in the commercial sector, is good at 76%, the penetration in business is low. It's only 20%," said Cook. "And to put that in some kind of context, if you looked at penetration of notebooks in business, it would be over 60%. And so we think that there is a substantial upside in business."

"That's why they're focused on the enterprise, that's why it's right they're focused there," said Baker of Gartner. "Cook would love to see that 20% climb to 60%. So the IBM deal was a very smart move on their part."

Cook said he was excited about the enterprise market for the iPad. "And we win if we can drive that penetration number I spoke about from 20% to 60%," Cook said during the Q&A portion of the earnings call. "That would be incredibly exciting here. The walls would shake. And so that's what I hope for."


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