Some desperately needed context surrounding Apple’s iPad sales decline

“Apple during the quarter gone by posted stellar earnings, with revenue that topped some analyst estimates by a whopping $2 billion. Naturally, extremely strong iPhone sales accounted for the bulk of Apple’s quarterly profit while iPad sales were much weaker than analysts were anticipating,” Yoni Heisler writes for TUAW. “All told, Apple sold 16.35 million iPads during the quarter, representing about a 16% decline in sales from the same quarter a year-ago.”

“So what gives? Are the iPad’s best days behind it? Did Apple’s famed tablet, as some have written, struggle with unrealistic expectations?” Heisler writes. “Maybe. Maybe not. Truth be told, there are not yet enough data points to make any sweeping generalizations about the iPad’s vitality.”

“The drop-off in iPad sales may have more to do with an unseasonably strong Q1 2013 than a particularly disappointing Q1 2014,” Heisler writes. “Put differently, the distribution of iPad sales across Q4 and Q1 may have simply returned to normalized levels this year. Which is to say that all of the hoopla surrounding a defeated iPad is misguided, to say the least.”

Read more in the full article here.

31 Comments

  1. You want context, I’ll give you context.

    That fucktard Ive fucked up iOS 7 turning the iPad into a glorified chopping board to chop your vegetables on.

  2. This iPad is failing stuff is pure BS. Everyone in the world (bar the 1%) are absolutely broke, and big iPad sales took place at Christmas. It’s the one gadget people aspire too, but they get a smartphone at the moment because its what they can afford. It will sell big once again at Christmas. Apple has no iPad problem, it has a product the world wants. The world, however, has an economic problem. Unfortunately we’ve left the repair of that to these same stupid analysts (I should have their job) who feed us the iPad problem line. It’s not Tim Cook needs sacking. It’s the analysts.

    1. The problem with what you said is that the 16% decline is YOY (year over year) meaning last year there was a Christmas too, and affected the same quarterly results.

      As far as the economic conditions, they’ve modestly improved over last year in the US, and even more so globally.

      I don’t think 16% is anything close to freaking out over, and as this article points out, it’s only one data point. But anyway you look at it, it’s a 16% drop from the same period last year.

      While Apple may own the bulk of the tablet profits for the foreseeable future, I do think we’ll see a slowdown in the market overall. We’ll reach a saturation point where growth slows for tablets. The replacement/upgrade cycle will be closer to PCs than it will with phones. The unfortunate reality is that when the bulk of the product is screen, there’s very little that can be done to radically evolve the product each year. With no subsidy cycles, the market is bound to slow down.

      1. I have to disagree with you about economic improvement, even if you call it modest. The U-6 unemployment number is still above 12% and health care costs are a “drag” on the economy.

        My read is that things are bad and items like iPads are paid for with discretionary income–just not much of that out there.

        1. Sorry, but you’re factually incorrect. If you want to use U-6 data, let’s take a look. The iPad came out in April 2010. Here is the non-seasonally adjusted numbers for April:
          2010 – 16.6
          2011 – 15.5
          2012 – 14.1
          2013 – 13.4
          2014 – 11.8

          Non-seasonally adjust makes more sense because we’re talking about the absolute state of the economy, but seasonally adjusted tells the same story:
          2010 – 17.2
          2011 – 16.1
          2012 – 14.6
          2013 – 13.9
          2014 – 12.3

          The improvement is mirrored through any of the U-Measurements.

          US GDP? It’s improved every year as well since the introduction of the iPad… 2.5%, 1.8%, 2.8%, 1.9% This compares to the years leading up to the iPad of 1.8%, -.3%, -2.8%.

          Disposable Personal Income increased every year since the iPad was released from under $36,000 in 2010 to $40,216 today, wherein it had been $37,500 in 2008 down to $35,900 in 2010.

          These are just US numbers, but globally the situation has improved as well. This is true on any metric I can think of. Consumer Confidence… 82.3 up from 56.3 in 2009.

          Can you point to any economic data showing that things are worse in any way today as compared to when the iPad was first released, or any other year in between?

          1. When a new product comes out, all consumers do not own one–including consumers with a great deal of discretionary income. After several year (with unemployment above 12%), many consumers who do not have a great deal of discretionary income would like to own one, but decide to use their money in other ways.

            You are free to say that the US economy is improving, but I do not see it. I see “barbells” with increasing separation between rich and poor and little or no improvement to median income or middle class purchasing power. I am sure that you noticed that the middle-income people in Canada are now seeing greater economic improvement compared to the US– a first.

            1. Look, if you want to complain about the economy, that’s fine, I understand. I haven’t been arguing about income disparity, the plight of the working class, economic injustice or anything else along those lines. I’ve only been pointing to jonnyr23’s argument that the 16% downturn in iPad sales is due to an economic downturn. That has nothing to do with Canada. Canada could have accelerated to 10 times our GDP, and it wouldn’t explain the 16% YOY downturn in iPad sales.

              You’re pointing to information that is dated. Specifically, it’s dated with an end date of 2010 in the case of Canada passing the US. Look at that NYT graph again, and you’ll see that it proves my point regarding iPad sales. There was a downturn leading into and during 2010. Look at your very own Huffington post article and you’ll see that the downturn in data they’re reporting bottoms out at 2012.

              You are free to say that the US economy is improving, but I do not see it.

              That’s because you’re turning a blind eye to every single piece of economic data.

              Look, here’s a chart showing the US is actually in a great depression (of course it’s end date is in the 1930s). That type of argument doesn’t work for supporting the idea that the 16% drop was due to economic conditions.

              “The typical American family’s income has fallen every year since 2007”

              That’s every year since 2007 until 2010 (the year of the iPad launch). It’s increased every year since then.

              Again, the debate here is why iPad sales are down 16% YOY in 2014 (April). Show me one piece of data that shows any economic impact in the US or globally that would account for that. Every single source of data shows the change in economic conditions has been positive.

      2. Oh I don’t believe the official lines that there is improvement — aren’t elections coming? There is no improvement. In the UK the 1 percent improvement that’s being touted about is swiftly eaten up in any small business by steep increases in energy bills. It’s all lies. There is no economy.

        1. Whatever, look up the real numbers. Guess what, there were elections in 2010 and 2012 as well. Pointing to the economy as a reason for a drop in iPad sales is illogical because any way you look at it, the economy was crap when the iPad was first released and has improved in the US and globally every year since then. You’d need to come up with some downturn that explains why sales ending in April 2014 were down from April 2013. There just isn’t economic data from anyone (including political opposition) that supports this as being an economy issue (see my other post with economic data).

          1. No wonder so few Americans seem to think their economy is in recovery: They keep getting poorer. Unless they are rich, in which case they keep getting richer.

            Median household income fell for the fifth straight year in 2012, the Census Bureau reported on Tuesday, to $51,017. That was the lowest annual income, adjusted for inflation, since 1995.

            The typical American family’s income has fallen every year since 2007, the year the Great Recession began, for a cumulative decline of 8.3 percent. Median income is also down 9 percent from its record high of $56,080, set two recessions ago in 1999. (Story continues below depressing chart.)

            http://www.huffingtonpost.com/2013/09/17/median-income-falls-inequality_n_3941514.html

            1. You just did that again. You’re pointing to old data and representing it as a trend. Point to new data and the trend looks entirely different.

              Income is up since 2012.

              Again, this is iPad sales YOY that we’re talking about and every economic measurement shows a downturn leading into 2010 (when it was announced) and every measurement showing improvement either since then or since 2012. Not one single piece of economic data shows a downturn in the US or more importantly globally that would account for a 16% drop YOY in 2014.

              The argument would make more sense, or at least be consistent with the data, if it was just the opposite… to say, “people buy more iPads in worse economic times”.

            2. It looks like you are a fan of Austan Goolsbee and Paul Krugman while I prefer Nouriel Roubini and Peter Morici. Different strokes for different folks makes a horse race, eh?

              If you think that the economy of the US is improving, fine, you are welcome to that opinion. I look at 12% unemployment, high energy costs, high gasoline costs, flat housing prices, bad numbers for new construction…

              Data is data, interpretation is personal, and I am glad for you that the US economy seems to be improving. For me, for my friends, for my family things are tough.

            3. “Data is data, interpretation is personal,”

              No, it’s not. Did you and your family buy iPads in 2010, 2011, 2012, 2013 and then not buy them in 2014???

              You did? Great, did you buy every iPad that was sold in 2010-2013 and then buy 16% less in 2014? Ok, if that’s the case, I stand corrected.

              You and your family, your entire town, every person you know could be in a worse situation in 2014 than you were in 2013. And by the way, if you are, I’m truly sorry for your situation and truly hope things improve, but you’re not explaining how your situation lead to the 16% drop in iPad sales in 2014.

              “It looks like you are a fan of Austan Goolsbee and Paul Krugman”

              It looks like you can’t differentiate emotional opinion from facts. Nowhere in any of my comments have I offered any political opinion or economic theory whatsoever. Nowhere have I stated anything in any context other than economic impact on iPad sales.

              “If you think that the economy of the US is improving, fine, you are welcome to that opinion.”

              But it’s not opinion. It’s fact based on all available data. You’re the one offering opinion based on anecdotal evidence and generalizations that are untrue when you look at the data (see below). You’re saying that your economic conditions deteriorated 2013-2014 and are applying that to the economy at whole to explain a 16% drop in iPad sales. I can’t argue that your situation didn’t worsen, because I have no idea. But all data on the economy at large shows a sharp downturn for the years leading into 2010 and an upturn since then with all indicators being up 2013-2014. Those are facts.

              ” I look at 12% unemployment”

              See, there you go. That’s the number you wanted to use, and I went with that. That’s the U-6. The very data you’re quoting proves you wrong. The actual number is 11.8 and that’s down from 16.6 in 2010.

              Which is the bigger number, 16.6 or 11.8? If it was 16.6 and went down to 11.8 is that an improvement or a worsening of the economy? This is your number, and your quote, and it proves the opposite of the very point you’re trying to make.

              high gasoline costs

              Look, another one of your numbers that proves you wrong! Gas prices peaked in 2010 at $3.96 and now average less than $3.60 in 2014. Which is the worse number?

              flat housing prices

              And yet another one of your own numbers that proves you wrong. Using a 2007=100 pricing index, the US average bottomed out in 2010 at 73.3 and is up since then to 88.0 (latest numbers are end of 2013). Which is the worse number?

              bad numbers for new construction

              One guess on where this is going…

              Nope. New housing construction totals bottomed out at the end of 2009 with 554,000, we finished 2013 with 924,900.

              high energy costs

              Hey, you may have a point here… no, just kidding. Home heating oil costs peaked in 2013 at 4.161, but they’re down now to 4.123 the same level as the peak in 2012. So again, for this year of iPad sales ending in April 2014, home heating oil prices were lower than the year before.

              Again, it’s one thing to complain about how bad your financial situation is or even how bad the economy is. I haven’t ever said the economy was rosy. But the argument here is that there was a 16% drop in iPad sales due to a worsening of the economy and no economic data shows anything that didn’t improve over the same time frame.

              Every single point that you mention proves just the opposite when you look at the actual data.

              Point to one piece of economic data that shows a worsening of the economy over the same time frame. Everything you’ve pointed to so far as an actual number (like U-6) or as a generalization has proved the opposite in fact.

            4. 1) I have read a good deal of Austan Goolsbee/Paul Krugman and a good deal of Noureil Roubini/Peter Morici and all four are looking at the same “facts,” the same “data.” My view is that interpretation is personal–these gentlemen are leaders in their field and disagree on just about everything. I am sorry if you believe in “facts” which allow for only one interpretation, because that is not how “hard sciences” such as physics work let alone “soft sciences” such as economics.

              2) I use http://www.bls.gov/news.release/empsit.t15.htm and see seasonally adjusted U6 as 12.3, but if you think that 11.8 is a better number to use, fine. They both point to a bad economy in my interpretation. Is 11.8 better than 12.3 better than 14? Yes, but these are still bad numbers which points to a weak economy. Just because unemployment is not getting worse does not mean that the economy is good, n’cest pas? Have you noticed that not all economists agree on the state of the economy?

              3) You miss the point of discretionary income. In a bad economy (I agree with Roubini/Morici that our economy is not doing well and disagree with you and Goolsbee/Krugman who see improvement) after a product has been available for sale for a number of years, there are fewer people with enough discretionary income to buy some kinds of consumer goods. This will cause sales of things like iPads to “flatten.” Will you agree that if the US economy is “weak” or “soft” the amount of dollars available to buy iPads will diminish over time–not immediately, but over time? This is what we are seeing–the pipeline of discretionary income in a weak economy does not close like a mousetrap, it slows a bit, then slows faster.

              4) You want me to point to some economic data that shows that things are worse, and I want you to consider the possibility a prolonged period of bad economy has consequences so that when data improves it might not mean that the economy is improving. The simplest example is that people leave the work force, they give up, and then they are not longer considered unemployed. You may wish to read a nuanced approach to the recent job numbers:

              From David Leonhardt’s piece in the New York Times on May 2:

              “If you believe the household survey, the economy lost jobs. If you believe the business survey — which is much larger than the household survey — job growth was quite strong. They cannot both be right.”

              I hope that you can see that data tells us nothing and interpretation is personal, and I hope that you understand that there is an important distinction between “personal” and “uniformed.” Morici/Roubini disagree with, Krugman/Goolsbee, but not because they are uniformed but because their personal interpretation of data is different.

            5. Backing up a bit so the comment isn’t so narrow…

              ” I am sorry if you believe in “facts” which allow for only one interpretation because that is not how “hard sciences” such as physics work let alone “soft sciences” such as economics.”

              No, the data is what the data is. That is a fact. You can come up with different interpretations of the data to a degree, but you can’t point to data to support a theory when the very data you point to disproves your theory. You’re doing that with U-6, and you’re using anecdotal evidence contrary to any reported data that’s been gathered.

              “all four are looking at the same “facts,” the same “data.””
              Point to a quote from any one of them that states any economic data showed a downturn in any way 2013-2014.

              “see seasonally adjusted U6 as 12.3, but if you think that 11.8 is a better number to use, fine”

              I mentioned this earlier. Non-seasonally adjusted is more relevant since we’re talking about an absolute comparison. How did the iPad sell 1Q 2013 versus 1Q 2014. If one had a seasonal impact over the other, it doesn’t matter, what matters is if the economy worsening (seasonal or otherwise) resulted in a 16% drop. But either way, seasonally adjusted or not, the U-6 improved.

              “They both point to a bad economy in my interpretation.”

              That interpretation, while obviously correct, is irrelevant.

              “Just because unemployment is not getting worse does not mean that the economy is good”

              No, and again, I never said anything like that. But at issue is an improving economy supposedly having a 16% negative impact on sales.

              “You miss the point of discretionary income.”

              You missed the fact that there was an increase in discretionary income.

              “(I agree with Roubini/Morici that our economy is not doing well and disagree with you and Goolsbee/Krugman who see improvement)”

              “Not doing well” is not contradictory of “seeing improvement”. You don’t jump from bad to good as a binary, you *improve* over time from bad to good.

              “after a product has been available for sale for a number of years, there are fewer people with enough discretionary income to buy some kinds of consumer goods. This will cause sales of things like iPads to “flatten.”

              The problem with this is that discretionary income was up. Consumer spending was up. Consumer spending on tablets was up.

              Again, if you’re going to blame the economy for a 16% drop in iPad sales, point to an economic indicator that supports this with any relevant data.

              “From David Leonhardt’s piece in the New York Times on May 2:”

              The very last paragraph of that article reads, “The labor market appears to be gaining strength. But there are enough conflicting signals that we will need more months of data before we can be sure.”

              Also watch the video online from the article. He clearly states that the better numbers showing improvement come from a much larger data set and that’s what we should be looking at.

              This will cause sales of things like iPads to “flatten”. Will you agree that if the US economy is “weak” or “soft” the amount of dollars available to buy iPads will diminish over time–not immediately, but over time?”

              But we didn’t see sales “flatten”. We saw a 16% drop. Certainly if everyone in the US was rolling in dough, iPad sales would be through the roof. And conversely if everyone in the US made minimum wage, we’d see no iPad sales. Anywhere in between and at some point the market becomes saturated and sales flatten… flatten, but not drop 16% for a quarter YOY. And again, this effect wouldn’t be seen when the market grew overall YOY.

              Again… 16% drop. 16%!!! I’ve been following this story elsewhere looking at other explanations for this, and I think this article here actually explains it best. It misses the fact that last year a 128GB iPad 4 was introduced, and that may have helped boost last year’s numbers a little, but I think it was mostly due to backlog spillover into Q1 2013 as well as initial purchases of the mini with fewer upgrades beyond the initial introduction that occurred in Q4 2013.

  3. One only needed to listen to the analyst phone call, where Tim Cook his own self went out of his way to patiently explain that a build-up of channel inventory (ie shipments) during the holidays meant less “sell-in” (sales to retailers) than happened last year. Actual SALES (ie to end-users) saw a 2-3 percent decline.

    So this article is just a rehash of what was already explained. But at least it was yet another reminder that shipments (sell-in) do NOT equal sales (sell-through).

  4. The iPad is not the same as the iPhone. People are use to upgrading their iPhones every 2 years or so – thanks to the telecoms subscriber plans.

    The iPad is a different story. People are not use to upgrading their iPad as frequently. The iPad is built to last (as is the iPhone truthfully). We still use a 1st generation iPad and a 4th generation iPad in our house. The 1st generation iPad still meets all of our modest needs.

    Thus iPad sales have declined due to the fact that people are not upgrading their iPads as often as they do their iPhones.

    1. iPad has actually sold TWICE as many units as the iPhone in the same time period.
      A small pause is to be expected after 3 – 4 years.
      iPhone was (and is) a monster.
      iPad has been a mega-monster.

  5. I can’t believe anyone hasn’t mentioned this.

    iPad 4 128GB… I think that was released Q1 2013.. That could have explained the difference in sales and the article is correct that what we saw this year was “normal” Just this year, I have bought 2 more iPads than I had last year. I think I am pretty typical.

  6. The iPad is doing fine.
    1- Older iPads are still wonderful devices and many see no compelling need to upgrade.
    2- In the economy of today, many find $500-800 for a new iPad an unjustifiable expense in light of the one working in their hand.

    When the older iPads batteries start to go bad there will be a nice upgrade cycle. This is the same problem Microsoft faced/faces with Windows XP- for a not insignificant number of people it is enough.

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