Will Apple's iPad Sales Recover This Year?

Apple (AAPL) derives a large portion of its revenue from the iPhones. If fact, the iPhones account for over 50% of Apple’s revenue. Over-reliance on a single product can be a bad thing in the long-run, which is why Apple is consistently looking for ways to diversify.

During the initial years of the launch, it looked like the iPads would help Apple diversify. However, the iPad business hasn’t lived up to the hype and currently accounts for a very small portion of the company’s revenue.

Apple has consistently outperformed in the smartphone segment, but its iPad business has been decelerating for previous few years.
The main reason behind declining sales is that may be customers expect a comparatively long tablet-replacement cycle coupled with the reduction in sales of iPad by larger iPhones.

However, the company’s most awaited iPad Pro finally arrived in the market two weeks ago. The company’s 16-GB basic model of iPad Air 2 including Wi-Fi starts at $499 and the 128-GB top model including Wi-Fi and cellular connectivity comes for $820.

But in the case of iPad pro, the 32-GB model already starts at a price of $799, followed by the next model offering 128-GB of storage for $949. The company did not design a 32-GB model supporting cellular connectivity, whereas, it offers 128-GB model with cellular connectivity for a mindboggling $1,079.

The most exciting thing is that there exists no such middle option for customers. A customer buying iPad Pro 32-GB model for $799 will get a really quick, well-built device, while the more lavish spenders will have a much more advanced version.

Furthermore, demand for iPads with cellular connectivity is more than iPad Air or iPad mini. If this demand continues, it could offset the falling sales by pushing customers towards the higher margin iPad Pro 128-GB with cellular connectivity.

Till now, the only problem with the iPad pro is the slow adoption rate. According to a report, Apple’s iPad Pro signified only 0.3% of total iPad usage, by the end of its first week sales. The adoption rate is considerably slower than the iPad Air or iPad Air 2. It indicates that company may have traded about 0.5 million iPad Pros in the starting week.

Microsoft faced the same situation when it changed its focus to Intel-grounded surface tablets, but with the time moving forward gained customer acceptance. This demonstrates that a sluggish start does not essentially fate a new product to perpetual triviality.

Hence, after years of falling sales, I think the iPad’s may finally buck this downtrend this year. Moreover, the higher-margin iPads, where demand will likely increase, will add to Apple’s earnings considerably.
Published on Dec 8, 2015
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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