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Stop freaking out: The iPad isn't dying

Dan Miller | April 25, 2014
By any normal measure, it was a good quarter for Apple: Revenues and earnings beat analyst estimates handily, iPhone sales were robust, even the good old Mac eked out a nice little gain. But CEO Tim Cook still seemed to be on the defensive from the get-go, all because of the iPad.

By any normal measure, it was a good quarter for Apple: Revenues and earnings beat analyst estimates handily, iPhone sales were robust, even the good old Mac eked out a nice little gain. But CEO Tim Cook still seemed to be on the defensive from the get-go, all because of the iPad.

Second-quarter sales of the tablet, Cook preemptively pointed out at the beginning of the earnings call, were at the high end of Apple's forecast. So who cares, he seemed to be saying, if those sales were at the low end of analysts' projections?

But in the expectations-are-everything world of financial reporting, disparities between projections and reality can't be ignored. And so Cook had to spend a lot of time on the call explaining why iPad sales were down this year compared to the second quarter of 2013 — from 19.48 million units in 2013 to 16.35 million this year, from $8.7 billion in sales to $7.6 billion. "Sales" and "down" are not words that we're used to seeing together when talking about Apple, so explanations are called for.

Cook had no shortage of them.

Explain yourself

First, he put things in perspective. Calling the iPad "the fastest growing product in Apple's history," he said that Apple has sold more than 210 million of the tablet in the four years since it launched — almost twice as many as the iPhone in a comparable period of time and almost seven times as many as the iPod.

Second, he put on his Mr. Operations cap (which, let's face it, is his favorite). He pointed out that, in the second quarter of 2013, Apple fulfilled a bunch of iPad mini orders that had been backing up in the system since the quarter before. This year, he said, the company did a better job of balancing supply and demand. In other words, that year-ago sales bulge, in comparison to which this year's sales seemed to be a disappointment, was a mistake.

After that, Cook played the niche card: Tablet sales overall might be down, but, hey, we're doing great in education! Seriously: Apple claims to have a 95 percent share of the tablet market in schools. And it's doing well in the enterprise, too: Virtually all — 98 percent — of the companies in the Fortune 500 are using iPads, he said; according to Good.technology, 97 percent of tablet-activations in the enterprise are iPads.

There's good news elsewhere, too, according to Cook: Customer satisfaction at 98 percent. Intent to buy at two-thirds. Four times the Web traffic of any other tablet. The bottom line, he said, is that you can't have a "number that everybody's thrilled with" every quarter. But the trend over time, he insisted, looks very good.

 

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