Why Apple is Letting iPad Sales Drift Downward

Apple has watched the iPad sales numbers drift downward since 2013. Apple has smart executives. The only conclusion John can draw is that in 2013 and again in 2015 Apple embarked on an aggressive, multi-phase program to breathe new life into the iPad. It’s just taking some engineering time, and so during each quarterly Earnings Report, CEO Tim Cook just has to roll with the punches until it’s done.

The 12.9-inch iPad Pro and Pencil. Not enough oomph.

Oh, Please

First, I want to comment on what Apple CFO Luca Maestri said, at about the 20 minute mark in the May 2nd Earnings Report. Commenting on the (dismal) 8.9 million iPad sales in Q2, Mr. Maestri said,

Turning to iPad, we sold 8.9 million units which was ahead of our expectations, despite supply constraints throughout the quarter.

I have several bones to pick about that comment before I proceed.

1. Apple executives likely have a very good feel for how many iPads will be sold, especially in the non-holiday quarters. Reports from the online store, the Apple retail stores and other retailers worldwide likely allow a very good estimate of end-of-quarter results. So, to say that iPad sales exceeded expectations seems less than candid. Are we to believe expectations were poor and then something amazing happened? Are we to get all giggly over the dismal number of 8.9 million?

2. Apple has been making iPads since 2010. But lately, executives Cook and Maestri have lately been providing the excuse that the company could sell more iPads if only supplies weren’t constrained. How can such a breakdown in the supply chain happen under Tim Cook’s watch seven years into the product’s existence? Are we to feel sorry that supply constraints sabotaged potentially huge sales?

Enough of that.

iPad sales, in millions of units, since launch.

A Brighter Future

I now think there’s a reason Mr. Cook and Mr. Maestri are biting the bullet during the earnings reports. There’s something they don’t want to give away. In fact, may suit them to put a false hype on the iPad and leave it at that. After all, Tim Cook could have said, “We’re working feverishly behind the scenes to fix this dismal, declining sales situation.” Given the lack of success of the iPad Pro to solve the sales problem, astute analysts (and the competition) might conclude that something new (and exciting) is afoot. Bad idea. Shows their hand.

Allow me to backtrack a little. I recall that Apple’s introduction of the 12.9-inch iPad Pro in November 2015 and the 9.7-inch iPad Pro in March of 2016 were intended to stem the negative growth in overall iPad sales. The embrace by the enterprise and the iBM partnership was likely seen as a healthy boost that would overcome the now evident longer upgrade cycles for the iPad in the general population. This effort may have been conceived, as I mentioned above, in 2013 or early 2014. However, since Q1 2016, iPad sales have continued to decline. Even the two intervening holiday quarters showed a decline. (See the chart above.)

With that original plan not working, I strongly suspect that there’s second plan, Phase II, also designed to get iPads back on a growth path. I don’t know what it is, but I’m going to speculate that the Microsoft Surface Studio, launched in October 2016, is influencing Apple.

iPad & Influence

Here’s my theory. If the iPad is going to grow again, it has to outright replace the Mac. So long as the Mac remains revered and viable for power users, the iPad will always be seen as an underpowered, not-very-expandable poor cousin. Sure the iPad can and does do great things for artists, writers, business people, students, and those in exodus from their PCs. But until the iPad can replace a Mac and plant its stake in the future, it’s going to be damaged by long upgrade cycles, slowly developing technology, and inherent security constraints.

Tim Cook has said, “The iPad is the clearest expression of our vision of the future of personal computing.” To make sure that vision flourishes, something dramatic has to happen.

One example I’ve mentioned is a new member of the iPad family. A 27-inch iPad that, via some kind of Rosetta-like technology, can run macOS apps. This solution would probably please 80 percent of Apple’s customer base. (Of course, Apple would continue to sell Mac Pros to the power users.)

MSFT Surface Studio has some problems. What if Apple did its own version the right way?

The Best Surprise is an Apple Surprise

Or Apple’s Phase II plan could be something else, entirely unexpected. Several things are certain, however. Apple hasn’t updated the 12.9-inch iPad Pro in 18 months. We didn’t get a refresh of the 9.7-inch iPad Pro this spring. Instead, there was the warmed-over 5th generation iPad in March, a product geared towards the education market. The competition is briskly sizing up Apple’s lapses and building competitive products. And so, this gap in time has the earmarks of a design rethink and reset.

Something Big is brewing. I sense it. Maybe iOS 11 at WWDC next month will provide a clue. Or it may not happen until iOS 12.

No executives have been sacked at Apple for a negative iPad sales rate that tends toward zero sales in about 2021. CEO Tim Cook and his team are smart and impatient people. I”m betting we’re in for a big and pleasant surprise soon.

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