Apple iPad demand: What's the real story?

After reports of weak iPhone demand, now we're hearing about weak demand for the tech giant's tablet.

By TheStreet Staff Jan 18, 2013 1:51PM

iPadMini copyright 2012 Apple IncBy Chris Ciacciathestreet logo

 

As we head into the most important earnings release Apple (AAPL) has ever had, demand concerns are popping up left and right. 


First, there were worries about the iPhone, now we're hearing about iPad concerns. What's the real story?

 

Reuters has a report that Sharp has cut output for iPad screens, suggesting that demand is slowing for the full tablet, shifting to the iPad Mini.

 

This isn't anything new. Wall Street has been expecting that iPad Mini sales would cut into the 9.7-inch iPad tablet sales since the product was announced in October. Investors must also bear in mind that Apple has multiple parts suppliers for screens, including LG.

 

Concerns over rivals overtaking the iPad appear to be speculative at best, with companies like Google (GOOG) and Amazon (AMZN) having limited success with their tablet offerings. Only Samsung has managed to grab significant market share, but Apple still holds a dominant portion of the market, with 53.8% according to IDC

 

It's become "cool" to hate Apple now. "I can't believe liking Apple is now contrarian," said a hedge fund analyst, who declined to be named. The analyst, who has a position in the company, has been buying shares on the way down as Apple hit its all-time high in September, only to retreat below the $500 level earlier this week.

 

The iPad Mini has proved a hit, with Apple announcing it sold over 3 million fourth-gen iPads and iPad Minis the first week both tablets were available. A look at Apple's website shows the iPad Mini is still on backorder, with consumers having to wait a week for the various models.

 

While demand has never been an issue, margins are another story. Most analysts believe that the iPad Mini has lower gross margins than the full iPad, and that's causing some concern. JPMorgan analyst Mark Moskowitz believes that the iPad Mini "appears to be grabbing a bigger part of the mix" in terms of the overall market. He expects iPad ASPs (average selling prices) to come down as a result.

 

However, there is a ray of hope. Moskowitz believes the iPad Mini actually has better margins than the iPad. "The silver lining here is that our research indicates that gross margin on the iPad Mini could be better than the larger iPad, which is partly why our consolidated gross margin assumptions are improving for the Dec-Q and out quarters," Moskowitz wrote in a note. He rates Apple "overweight."

 

Demand for the iPad and iPad Mini is not shifting to other companies, it's shifting between Apple products. CEO Tim Cook has repeatedly said Apple doesn't worry about cannibalizing its own offerings. "...[S]o we've learned over the years not to worry about cannibalization of our own products, it's much better for us to do that than somebody else to do it...," Cook said on Apple's fourth-quarter earnings call. He noted that there are still over 300 million PCs being bought each year, and that Apple would rather eat into that market than worry about cannibalizing itself.

 

Demand for the iPad isn't slowing down. If anything, it appears to be heating up, as consumers realize the benefits of the iPad Mini. Now, if only Apple could keep them in stock.

 

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30Comments
Jan 18, 2013 3:05PM
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Apple built it's fortunes on innovation and quality. Problem is there are no revolutionary game changing products rolling out from Apple, just upgrades of the same old thing.
Jan 18, 2013 2:51PM
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the stupid people who pay ten times what a product is worth are running out duh!
Jan 18, 2013 2:36PM
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Market saturation is a killer for sales.  There are some people who need to have the latest and greatest, but not enough to maintain the kind of volume that Apple has seen over the past few years.  A lot of people are probably still using the older versions of their products because the still basically run fine.  It might be more of a cyclical thing now where people wait until their device breaks or until much better features are added before they upgrade.  There is also a lot better competition from Android phones and tablets these days, that could be a factor.
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I can buy 3 Kindles for the price of 1 ipad, end of story.

Jan 18, 2013 2:00PM
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The real story is no story. Shut up and wait for the facts.
Jan 18, 2013 2:09PM
Jan 18, 2013 4:10PM
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People are finally realizing that Apple products simply aren't worth the price. Add in the loss of the "cool" factor and Apple may continue its slide downhill.
Jan 18, 2013 4:56PM
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Wow, y'all are a bunch of haters.  All it takes is for Apple stock to get mentioned in an article and the Apple haters all come out in force to engage in their favorite passtime of bashing Apple products.  Maybe its what you need in order to feel good about purchasing your non-Apple products.  Good for you.  Personally, I like my original iPad and iPhone 4.  They give me no trouble which is something I cannot say for my previous phone or laptop.   It's also why I have not needed to upgrade them.  For all of the trouble free months I have had them I consider the high purchase price as money well spent.
Jan 18, 2013 5:28PM
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Apple relies on telling people what they can and cannot do with technology. For some that is fine, but for others it's not. They force you into using their cloud and i-tunes to do everything. So, they shouldn't be surprised that as others complete against them and offer more choices that they would garner less business.
Jan 18, 2013 7:12PM
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Maybe, just maybe, the public has finally figured out that you don't need the newest freshest device from Apple every 9 months. Many of the "rest of us" have smart phone devices that last 2-3 years and only require software upgrades. As for the Ipad, remember, folks are actually waiting for the Surface Pro, which is a tablet that runs ALL software, not just applications that don't function fully. Once the Window's 8 Pro tablets hit the streets, folks will want a tablet that actually runs / works like a computer. Don't be shocked when Apples new Ipad will run like a macbook. However, Microsoft is going for simplicity and unification across the computer, smartphone, and tablet universe. All devices will run on the Windows 8 format for familiarity. But don't underestimate Apple's draw. Some people still find it cool to spend hundreds on the newest and "bestest" until they get burned again in 9 months.
Jan 18, 2013 6:28PM
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I think people are starting to wise up, dont pay for somthing you really dont need!
Jan 20, 2013 2:18AM
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Here's my take on this,,,, sorry for being so long.

 

I've been a MSFT devotee for 24 years now, even had a MSN online a/c at one time. I knew windows like the back of my hand and found it ergonomic and intuitive. To me it was a no brainer. I knew how to navigate through their programs with ease. Went from XP (skipped Vista, bad reviews) to windows 7 and was not very happy. 7 changed the way things used to be. Instead of improving windows I felt like they were going backwards in many ways. What used to be an easy task like e mailing and printing now required different ways to do it . Right clicks no longer allowed you to e mail web pages and documents, "send to" no longer worked. I could not believe that "send to e mail" is grayed in windows 7 and 8. BTW windows 8 is ridiculous. It's actually 2 separate operating systems in one, the original windows "Desktop" & the new  "Metro". I have it on my new PC and it took 3 weeks for me to get it to run smoothly. If you don't set up a MSFT a/c your PC will never run right. There are many buggy things in it and you have to learn how to re- set many settings to smooth it out. In the end the desktop is all I need and use. For me Metro is slow and totally useless on a PC.  It's so aggravating when you are on the desktop and it switches to Metro for  picture view and then you have to go through  many clicks to get back to desktop again. I also looked at surface and the windows phone and was totally unimpressed.

 

Now to my phone,,,,I have a Motorola droid X 2 years now I'm getting tired of it often freezing and needing restarting. They seem to have a planned obsolescent built into their phones. 

 

Where am I going with this,,,,,

I am really contemplating Apple for my next purchase. I'll need an I Mac, laptop, I pad mini and I phone. It seems to me that apple products are more stable, reliable and easier to use. Windows 7 and 8 seem to be MSFT's way of trying to emulate the Apple thing but not in a very good way. They've changed things to be more MAC like but they are going in the wrong direction. If they had just refined XP and made it more stable Microsoft would have hit a home run, instead they messed it up totally with windows 8. Things that were easy for me to do on windows no longer exist and now involve convoluted paths for me to do. I don't want to have to re-learn what I have been doing in windows for the past 24 years.

 

So in conclusion, I no longer have the 24 year allegiance and love I had for Windows. Metro is of no use for me.  I kind of feel betrayed by Microsoft.  I've discussed this with many other "old timers" and they also feel the same way. I also observed that most of the younger generation are using Apple products. Unfortunately, Microsoft has lost it's way and I believe in the end will eventually lose to them.  

Jan 18, 2013 3:21PM
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Why is there no mention of how Microsoft's Surface as a business competitor would impact the enterprise level usage of Apple tablets, or how the vast expansion of new Windows 8 laptop/tablet convertables which typically have a more attractive price point would impact Apple's elitist-priced products? Especially when these Microsoft alligned products are not simply focused on the social aspect, as Apple is, but provides full PC access in a tablet form for production. I don't know about you folks, but if I am going to pay as much as Apple is asking, I don't want to just purchase a toy. I want a workhorse. Watch out Apple...there's an old dog who has definitely learned some new tricks!
Jan 21, 2013 2:25PM
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Bought an iPad 2 a year ago, it still works fine. Will keep it till it dies. My MacBook is from 2007 and still works fine. I might rotate out in a year or two, because I want to do some heavy duty programming for both Mac and PC and I need a bigger hard disk and more RAM for that. I have an original iPod from 2001, and it too still functions with no problems. And yes, my trusty old iPod has hit the gym floor a few times, keeps right on working. I'll replace it with a Nano... if and when it ever dies. Apple makes quality products, so once everyone has one sales will naturally level off.

Jan 21, 2013 1:24PM
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"iPad Mini actually has better margins than the iPad"     Earnings report is going to be sweet.  LOL you watch.
Jan 19, 2013 11:45AM
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Not really sure Jobs, "was a motivator of innovations", way too many came before him; So as to have laid the "groundwork" in technology that could be tweaked to have differnt appearances and applications for a fickle mind...More or less buying something you don't really need, OR will only use 50-75% of a that product's capability.

I would more liken Jobs to a "snake-oil salesman" peddling his elixir/wares to a Generation and fringe generations that feel they are entitled to the latest and greatest....And needing more then the Jones;

Not just keeping up with them....He knew his audiences and buyers well and played/plays on their weaknesses....The Gotta Haves

A "Marketeer Extraordinaire" that had risen to the top of the food chain of snake oil salesmen.

And having a base of buyers, that possess ignorance and arrogance as a mindset.

PT Barnum made a great observance of this group decades ago.

Jan 18, 2013 9:58PM
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Since the passing of the greatest motivator in innovations, Steve Jobs, Apple has soured...... There just isnt much new coming around the corner, as many have said, putting a new coat of wax on an old car just means you have a shiny old car...
Jan 18, 2013 3:32PM
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Good news: crApple may finally be running out of idiots with more money than brains to ripoff.
Jan 18, 2013 6:11PM
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People are finally realizing that Apple products aren't always the best
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