The following is a transcription of Apple CEO Tim Cook’s statements regarding iPad from yesterdays Q414 conference call with analysts, verbatim:
I’d take a step back on iPad. I know that there’s a lot of negative commentary in the markets on this, but I have a little different perspective on it. Here’s my simple perspective: Instead of looking at this thing each 90 days, if you back up and look at it, we’ve sold 237 million in just over four years. That’s about twice the number of iPhones that we sold over the first four years of iPhone.
If you look at the last 12 months of iPad, we sold 68 million. And FY13 we sold 71 million. So we were down, but we were down 4 percent on sell in and the sell-through was a bit better than the negative 4 percent because we took down channel inventory some. And so to me I view it as a speed bump, not a huge issue. That said, we want to grow. We don’t like negative numbers on these things.
And so looking further in the data, I know that there’s a popular view that the market is saturated, but we don’t see that. I can’t speak to other people, but I do look at our data deeply. And, in the last market research data we have is in the June quarter and let me give you some of the real data that we’ve got: If you look at our top six revenue countries, in the country that’s sold the lowest percentage of iPads to people who had never bought an iPad before, that number is 50%. And the range goes from 50% to over 70%. And so when I look at first time buyer rates in that area… that’s not a saturated market. You never have first-time buyer rates at 50% and 70%.
What you do see is that people hold onto their iPad longer than they do a phone. And because we’ve only been in this business four years, we don’t really know what the upgrade cycle will be for people. And so that’s a difficult thing to call.
What we do know is that people always respond for us doing great products and we feel really great about what we introduced last week.
We also know that the deeper the apps go in the enterprise, the more it opens up avenues in enterprise – and that’s a key part of the IBM partnership and what I think customers will get out of that, which is more important than us selling, is changing the way people work. And so I see catalysts going forward.
There are obvious cannibalization things that are occurring. I’m sure that some people looked at a Mac and an iPad and decided on a Mac. I don’t have research to demonstrate that, but I’m sure of that just looking at the numbers. And I’m fine with that, by the way. I’m sure that some people will look at an iPad and an iPhone and decide just to get an iPhone and I’m fine with that as well.
But over the long arc of time, my own judgment is that iPad has a great future. How the individual 90 day clicks work out, I don’t know, bBut I’m very bullish on where we can take iPad over time, and so we’re continuing to invest in the product pipeline. We’re continuing to invest in distribution.
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I think the biggest problem with iPad at the moment is its relative inflexibility in file transfers, done for good security-related reasons. To improve iPad sales, Apple should raise the amount and accessibility of free iCloud space available to iPad owners and continue to bump up the onboard storage options.
I agree with commun5 about iCloud space. I think we should get more free space… perhaps 5GB per device, at a minimum, rather than just 5GB total. It’s a minor complaint, but (I think) a valid one.
Tim keeps trying but he’s not connecting with investors nor customers. When you need these many words to defend a product, you’ve got a problem. Remember when all that was need was “it just works”?
Yeah, those were the days.
Even when I don’t think you can do a better job, your idiot level keeps rising… good job!
Your hatred for Tim Cook is so irrational it blinds you to how transparent are your criticisms. About a month ago you railed on him for focusing on consumer gadgets over desktops, claiming that at the university where you “teach” the trucks roll in with Dell computers all the time and Tim Cook just leaves that market untapped. Now we see iPad numbers down and Mac numbers up, which should be the correct direction in your view and yet you’re railing on him now for taking 28 sentences to describe global commerce, buyer psychology, marketing and communications, product histories and roadmaps. Answer your own question: “Remember when all that was [sic]need was ‘it just works?'” — Okay, since you never post follow-ups I answer it for you: A) It still just works and B) back when that phrase was new and cool and useful, Apple was a $10B/year company, the stock traded at a split-adjusted $5/share, Microsoft was the company to beat and Pontiac was still a brand.
Yeah, those were the days.
Make that almost never. I have seen JM gamely follow up on occasion—to a serious response, when he has a strong position—but I believe he’s also suffered deletion of his posts once or twice, not for the usual profanity but for poisoning a jubilant mood. I have a theory that forums & blogs are moderated like shrubbery is pruned—some skilfully, some with a heavy hand, some in a desultory manner, but all of them perverting the shape of the conversation and suppressing growth in unwanted directions.
Yep, I agree with hannah.
Good morning!
I have also been afflicted with post deletion in the past, and understand how it feels to be moderated just for not agreeing with the forum/blog you are commenting upon. The comments I made that were deleted weren’t vulgar. They were based on facts/opinions that people didn’t like. I love free speech and places that respect it. As such, I cherish the ability to disagree with Jay Morrison’s incessant FUD and not be censored for doing so.
RE: “I have seen JM gamely follow up on occasion—to a serious response, when he has a strong position”
I would love to see an instance, Hannah, where Jay Morrison had a strong position on anything that wasn’t based on complete BS and, dare I say, dishonesty. He has a history of incessantly spewing out negative nonsense that asks for Tim Cook’s head on a platter… Hannah, Tim Cook could save 10 babies from a burning house and Jay Morrison would find a way to complain about it. That said, I don’t think he, or anyone, should ever be censored.
Two things I disdain literally are:
1) Censorship (via blogs, media and governments)
2) Dishonesty (via Jay Morrison and the troll brigade)
You are correct, jt016 … I should have expressed my pleasure at the Mac numbers. Especially when growth in real computers confirms my long held belief that it was a colossal blunder to abandon the corporate, government and professional markets by declaring the computers those markets wanted, needed, and would buy in great numbers to be “trucks.” Tim had a chance to resume the pursuit of that enormous demand and instead went for the pop culture and obsession over thinner and thinner phones and pads. What is happening to the iPad is entirely predictable and none of Tim’s rationalizations can change the numbers.
It was Steve Jobs who called them trucks and said not everybody needed one.
RE: “What is happening to the iPad is entirely predictable and none of Tim’s rationalizations can change the numbers.”
The last 12 months of entire PC shipments from the top 4 PC vendors:
Lenovo – 57 million units.
HP – 54 million units.
Dell – 40 million units.
Acer – 24 million units.
… Apple shipped 70 million iPads in that same time frame.
Apple sold 5.520 million Macs in Q414 compared to 4.413 million during the 4th quarter of 2013.
I don’t think Tim really wants to change the numbers, Jay. They look good.
correctu, you’re missing half of the story. Apple isn’t making as much money per iPad as they do per Mac, or that other PC makers earn per computer. What Apple has done to compensate for the lack of iPad profits is to become a media retailer for music, video, and software. Now it also is trying to convince everyone with an iPad to rent server space too. That’s been a good short-term gamble since obviously there are more consumers than there are creators. Long term, jury is still out. We may see that the new Mac mini and iMac will be more profitable for the next quarter than the new iPads.
Reviewers so far have been only partially impressed with the latest iPads. They openly say that they don’t need to update their hardware is Apple’s modest improvements aren’t more compelling. In my experience, eventually people realize the limitations of the iPad, and they reach for the MacBook or whatever to do more involved work. In the long term, the MacBook line has been and probably always will be the sweet spot of profitability … assuming Apple chooses to keep them updated, which Apple of late has been surprisingly bad about doing. It killed the sales of its own iPods only by being too lazy to update them. That’s the problem with Cook — he reacts to the competition rather than keeping Apple’s hardware the best it can be.
Note also that the iPhone, due to cellular connectivity at lower price points, will always dominate iOS gadget sales. This is why it is puzzling that Cook seems to think the iPad will be a huge money-maker over the long term. It’s the app store that makes money, all based on the work that 3rd party developers have done.
Thank you for responding, Jay. I’ll join Hannah and scratch that complaint off my list.
As correctu points out, the unit counts of pcs and tablets suggest that Steve predicted correctly.
When you compare the revenue and profit Apple derives from the sales of iPads against the revenue and profits those companies derive from sales of PCs, it’s hard to see why Apple would change focus.
Jay baby, Enterprise requires the cheapest damn Microsoft OS running laptop or desktop that money can buy.
Apple doesn’t even make that shit let alone try to sell shit like that. Let Dell go bankrupt again making Microsoft powered shit computers for Enterprise.
Yes Jay, you should have expressed your pleasure at the Mac numbers, that would have been refreshing. Instead you went on to desperately rationalize that it was a blunder for Apple to abandon the corporate, government and professional markets.
News flash Jay, Apple has never stopped making Macs. Tim is not resuming the pursuit of that market, he’s continuing it.
Oh and the pursuit of that enormous demand for thinner and thinner iphones and ipads is making tons of money for Apple. Investors and customers are happy with that. Not all investors and customers though, you aren’t happy with the watch, it’s not thin enough for you is it Jay? If I recall you called it “clunky”. So your spin is to criticize it if it is too thin and too clunky.
You are a whiner Jay, a first rate whiner. No amount of rationalization will change that. As someone else said Tim Cook would say a baby from a burning house and you’d still find a way to wine about it, just like you have when you should have been expressing your pleasure at the Mac numbers.
Has anyone read Jay’s new autobiography? It’s titled “iDiot: A Memoir of a Clueless Nitwit.” It’s a strong effort. Lots of pop-ups and fuzzy spots and even a coloring section.
There’s two things wrong with your “critique.”
1. iPads DO just work. If you think otherwise, you’re blind. And the iPad Air 2 seems incredible. It’s the first time I’ve ever even thought about getting a full-sized iPad. And I’ve been a firm believer that the iPad Mini was all the iPad I’d ever need even before the Mini was released.
2. Marketing buzz phrases have NOTHING to do with discussion of real business at quarterly earnings. Even if they occasionally throw those buzz words/phrases in, the purpose of an earnings report and conference call is to discuss issues IN DEPTH.
Moron.
You must have missed the last quarterly results Jay. Apple connects very well with customers and has been doing so for a while. I can’t speak for all investors, but hey I’m happy.
Your comment: “When you need these many words to defend a product, you’ve got a problem.” reminds me of a similar criticism brought forward by the Orsini-Rosenberg in the movie Amadeus about a composer having too many notes:
EMPEROR: Well, I mean occasionally it seems to have, how shall one say? [he stops in difficulty; turning to Orsini-Rosenberg] How shall one say, Director?
ORSINI-ROSENBERG: Too many notes, Your Majesty?
EMPEROR: Exactly. Very well put. Too many notes.
MOZART: I don’t understand. There are just as many notes, Majesty, as are required. Neither more nor less.
Apple and Tim Cook will be leaving a great legacy. More words to come to describe it.
Coherent words.
I don’t know if they’ll ring true, but Tim doesn’t promise anything. It’s such a far cry from the “normal” tech CEO that tries to take a dump on the competition and then states only circular logic and B.S. about their own strategy and products.
I have an iPad (first gen with Retina display) that I use every day at least a little bit. But in my office on my 27-inch iMac, when on the move I’ve got a MacBook Pro with Retina and then I’m on my new iPhone 6 an awful lot. Quite honestly, if there’s one that I would get rid of if I HAD to it would be the iPad.
However, if I was in a situation where I couldn’t afford the MacBook Pro I probably would get along great with more iPad use. And millions of other people are probably in that boat.
I guess what I’m getting at is that there’s room for all of this stuff, and as Tim pointed out he doesn’t really care what you’re into — so long as it’s got an Apple logo on it.
That guy is coaching long ball.
I bought the 1st iPad in 2010, and then an iPad 2 in 2011, so I’ve definitely gotten my money’s worth out of it and am ready for a new one. I love the TouchID on my iPhone, so I’ll be so happy to have it on my iPad. I was ready last year, so now I’m just waiting for availability at my local Apple Store (rather than ordering online).
Not when you have half a dozen different versions of iPad/iPadmini in the market when you count the wifi and cellular version then it just boggles the mind. SO many different version will lead to buy an ipad based on their economic ability and they will not haver a good experience which will lead lead to a bad review of their product. The newer iOS releases obviously cripples the older hardware and you keep selling them is not a good plan. I have an iPad 2/iphone 4s which I bought three years ago, I had a good use of it. with ios 8 it plain sucks, But I will buy a new one as I had good use of the older hardware, People who bought the iPhone 4s last year will be mortified and they are not going to buy a newer hardware paying more, they would have bought it last year if they had that kind of money!!!.
Reduce the price of the newer hardware and you will have more customers. Reducing the price of the older hardware and selling it for three years or more is not a good plan.
My two cents on why iPad growth as slowing:
Executive summary: Saturation and Slower upgrade cycle.
Bonus chapter: what this means for the Apple Watch.
Saturation:
I see the market size as much smaller than that of the iPhone. Where as most people can’t exist in modern society without both a phone and (at least access to) a computer, you can’t say the same thing about an iPad. If you have one or both of the first two, you don’t -need- the third.
You don’t use it like you do a phone, and it doesn’t yet do the type of heavy-lifting you can do on an Pro/iMac/Laptop/Mini. So for most people (aka, the addressable market) the iPad is a nice-to-have-device, not a need-to-have device. Ergo, much smaller market. How small? Bear with me for a sec while I take a moment to kick Microsoft in the nuts.
This will change when the lines between the lines between tablet and PC truly start to blur, and this is clearly where M$ though they had an opportunity to disrupt. Unfortunately for them, they suck at most everything they build and were therefore f’d before the Surface was a blueprint. Surface meet landfill.
Back to market sizing. I think there are something like 630 million iPhones out there. That there are 240 million iPads seems pretty logical. 1:3 iPhone consumers have sufficient disposable income for a third device, which is effectively a luxury. The other 2:3 of them put their money elsewhere because they can’t justify spending their cash on something that does pretty much what their phone and computers can do.
As an aside, I see the same thing coming for the Apple watch: the computer & phone will continue to be Kings of the product ecosystem. iPad and Phone will be Princelings. Fwiw, I suspect is how Carl Icahn got to 1:3 for his Apple Watch sales projections in 3-4 years.
Upgrade cycle:
Most consumers use the iPad for content consumption, browsing, and email. Given these use cases, an iPad from three years ago is still 99% as functional as the original iPad Air. Things may change with the new chip and the fingerprint recognition (which imho is a killer feature, esp in combination with Apple Pay), but imho, you’ll always see much longer upgrade cycle for iPads because they are not a must-have device like a phone or laptop and they don’t offer a significantly better UX generation over generation. I buy a new iPhone every cycle, and a laptop every two-three years, but I still have a second gen iPad.
All and all, this isn’t at all a problem for Apple’s overall growth, it just means that rather than freaking out about declining sales for the iPad, we should simply note that the iPad, and likely the Watch are never going to post numbers like the true King of Kings, the iPhone.
oops… Meant to say iPad & Watch in that aside.
Longest post you’ve ever made. Correct me if I’m wrong 🙂
Walt Mossberg, Re/code:
“So when Apple brought out new iPads last week, and I had a chance to test them over the past four days, you might think I’d be pretty excited about them — but I’m not. They are, in most respects, the best iPads ever made. But for average users, they represent only a modest evolutionary improvement over last year’s models, not the kind of big change that the first iPad Air or the Retina display iPad mini did last year.”
“The Air 2 didn’t allow me to hold or carry the tablet longer and more comfortably than the Air. Its weight of 0.96 pounds isn’t discernibly lighter than the Air’s weight of one pound. And its thickness of 0.24 inches is a barely noticeable reduction from the Air’s 0.29 inches.”
The thinness fad has to stop. More people care about battery life than thinness. That is stopping Apple’s ability to make meaningful improvements to many of its products.
I think thinness improvements naturally slow down as physical limitations are met, and so the improvements in other areas start to matter more.
It sounds like you’re sort of angry that Apple has been pursuing thinness. If so, I’ll offer a viewpoint that may lessen that anger: Apple has needed to create barriers to entry (or for success) to the followers, and thinness is obviously one where their engineering prowess has been successful. I would expect now that thinness has been achieved as a competitive advantage a few of those thinness engineers will be moving to new projects or new duties — and your desires will be met.
Well, after 36 hours withe my new iPad Air 2, I think I can safely say that there is nothing for Apple to worry about with the iPad. I sold my old iPad Generation 4 for $500, making the upgrade to a 128Gb WiFi + cell quite affordable. The smaller overall size, dramatic loss of weight, speed of the processor, touch ID and lift in storage space were very welcome. Downsides? I think it’s battery life is not as good, the new anti-glare screen shows up fingerprints more and has a slight grey colour-cast to it and I would have really appreciated more storage, 256Gb or more for photography use with a DSLR. However, Touch ID is brilliant, even more so than with Phone 6. Just walk up to it, place your finger on the pad and viola, it’s running. With iPhone I’m always dragging it out of a pocket and orienting it the right way round before using the touchpad, so it doesn’t seem quite so magic. The iPad is usually just sitting there asleep on a bench and my perception is that touch ID is just instant. Loving the better speed that newspapers and magazines download at and page rendering is near instant and the pages in glossy magazines look gorgeous. In fact yesterday I went to physically turn a page as if it were a real magazine sitting there!