“Tablets like the iPad are losing favor with consumers who are opting instead for smartphones with larger screens, putting pressure on Apple Inc. to cater to changing tastes,” Crayton Harrison reports for Bloomberg.
“Research firm IDC lowered its 2014 forecast for tablet shipments today, saying they’ll climb 12 percent to 245.4 million units worldwide,” Harrison reports. “That’s down from an earlier forecast of 260.9 million, and it compares with a growth rate of 52 percent last year.”
MacDailyNews Take: A few words about IDC’s predictive abilities:
• IDC: Windows Phone to surpass Apple’s iOS by 2015 – June 10, 2011
• IDC: Windows Phone to pass Apple’s iOS by 2016 – June 6, 2012
• Exposing IDC’s, Gartner’s, and Strategy Analytics’ PC, phone and tablet data on Apple – November 16, 2013IDC’s forecasts are hardly gospel.
“Larger smartphones, which IDC calls ‘phablets’ since they combine features of phone and tablets, represented 10.5 percent of smartphone sales in the first quarter, up from 4.3 percent a year earlier, the Framingham, Massachusetts-based research firm said,” Harrison reports. “Apple is working to catch up with the trend, developing new iPhone designs that have larger screens with curved glass, a person familiar with the plans said in November.”
“The iPhone and the iPad together represent about three-quarters of Apple’s total revenue, making it crucial for the Cupertino, California-based company to stay on top of consumers’ preferences,” Harrison reports. “iPad sales volume dropped 16 percent last quarter from a year earlier, the steepest drop on record.”
Read more in the full article here.
MacDailyNews Take: First of all: Crayton Harrison reporting for Bloomberg News lies by omission. Here’s why iPad sales volume dropped 16 percent YOY last quarter:
iPad sales came in at the high end of our expectations, but we realized they were below analyst estimates, and I would like to proactively address, why we think there was a difference. We believe almost all of the difference can be explained by two factors. First, in the March quarter last year, we significantly increased iPad channel inventory, while this year we significantly reduced it. Luca will go into more detail about this later.
Second, we ended the December quarter last year with a substantial backlog with iPad mini that was subsequently shipped in the March quarter, whereas we ended the December quarter this year near supply demand balance. We continue to believe that the tablet market will surpass the PC market in size within the next few years and we believe that Apple will be a major beneficiary of this trend… Additionally, over two-third’s of people registering an iPad in the last six months, were new to iPad, while over half of the people registering iPhones were new to iPhone. – Apple CEO Timothy Cook, April 23, 2014
As Tim explained earlier, our iPad results and the comparison to the March quarter last year were heavily influenced by channel inventory changes. Specifically, this year we saw 16.4 million iPads into our channels and sold through almost 17.5 million reducing our channel inventory by 1.1 million units.
Last year we sold over 19.4 million iPads into our channels and sold through 18 million and therefore increased channel inventory by 1.4 million units. As a result, the year-over-year sell through decline was only 3% compared to the sell in decline of 16%. We exit the March quarter with 5.1 million units of iPad channel inventory, which left us within our target range of four to six weeks. – Luca Maestri, Apple Vice President of Finance and Corporate Controller, April 23, 2014
Secondly, people with discretionary income and the proven will to spend it – in other words: Apple customers – can afford both a proper smartphone and a proper tablet. That’s what we have with iPhone 5s and iPad Air. For Apple to educate the ignorati and to also accommodate customers in emerging markets who desire to join the unmatched Apple ecosystem, a larger iPhone would be welcome. Apple’s goal is to delight customers, not to provide compromised products. Those who attempt to get proper smartphone experience (small, light, fits in your pocket) and a proper tablet experience (large screen, apps designed for tablets) with a “phablet” will only get the worst of both worlds.
This is not to say that Apple should not produce a larger screen iPhone. iPhone could have a larger screen (4.7-inch) and still be small enough to fit in your pocket and light enough to carry all day.
The people who buy phablets, for the most part, fall into three categories, some of which overlap:
• Those who cannot afford or do not want to pay for both a proper smartphone and a proper tablet. (Suboptimal customers who buy little or nothing after the sale.)
• Those who have never really used a smartphone and have not done proper research prior to purchase. (Potential exists to educate these customers.)
• Those who cannot adequately see images and text via iPhone’s current maximum 4-inch screen. (Most of these customers, we believe, would by Apple customers if they could.)The latter two groups should be Apple’s focus with a larger screen iPhone as they have the most potential to become valuable Apple customers who actively participate in the ecosystem. As for the first group, even with little to gain from them after the sale, the more Apple can snatch away from Android with a larger iPhone, the more pain Apple can cause the slavish copiers, the better.