Apple’s Healthy iPad Business

Apple’s earnings call yesterday (for the quarter ending March 30, 2013) revealed that its tablet product category, comprised of iPad and iPad Mini, is extremely healthy:

  • iPad quarterly sales rose year-over-year to 19.5 million compared with 11.8 million in the same quarter last year. This represented an over 65% increase. Seasonality effects – like the holiday season in many countries in November and December – meant that sequential-quarter sales dipped (as would be expected). What It Means: The iPad was the fastest-growing product segment for Apple by far. The iPad Mini has generated a new pathway for market penetration, while the iPad continues to be the market leader in its size category.
  • International – particularly Asian – iPad sales grew quickly. CEO Tim Cook called out successes in China (where iPad sales increased by 138%) and Japan. Apple plans to double number of stores in China from 11 to 22 in the next 2 years. What It Means: Having a healthy Asian business will be increasingly important to the iOS ecosystem as it competes with Android. (In China, for example, Android tablets enjoy a strong market presence). Apple is making the right moves to bolster its sales and its ecosystem in Asia.
  • iPad Mini sales contributed significantly to growth. Apple didn’t break out the specific split between iPad and iPad Mini sales. But iPad Mini sales generate a lower margin, as Apple did mention. And while iPad sales grew 65% year-over-year, revenue for iPad grew by 40% -- implying a higher mix of iPad Mini devices. What It Means: Steve Jobs was wrong to disparage the smaller form factor. Users – both consumer and business – are adopting the iPad Mini when it suits the usage scenarios they favor. Apple’s product portfolio is appropriately flexible: Not complex enough to confuse buyers, but offering choices that users will value.

One other point about the healthy iPad market: Although the iPad Mini was released only 6 months ago (in November, 2012), a chorus of observers constantly demands new products. But Apple’s ecosystem continues to improve its products even without new hardware product releases. The value of (for instance) an iPad 3rd generation is, today, higher than it was when it was released. Why? Because developers, brands, and software companies continue to innovate with more, and better, software experiences. Even when Apple doesn’t offer a splashy new hardware model, its products continue to grow stronger and better due to the vigor of its ecosystem.

What It Means for I&O Professionals: You have more choices than ever in the tablet market, from Windows 8 tablets, hybrids, and convertibles to Android 10” and 7” devices. But you can rest assured that Apple’s iPad remains the clear market leader today and a safe purchasing choice for the foreseeable future for your workers. And you will continue to see lots of Bring-Your-Own (BYO) iPads walking through the doors of your firm, as workers choose iPad to help them do their jobs more effectively.

J. P. Gownder is a Vice President and Principal Analyst. Follow him on Twitter: @jgownder