Thursday, April 30, 2015

tablet doom and gloom

There's been a lot of concern about declining year-on-year tablet, including iPad, sales.  I think the definition of the relevant market needs closer examination.

For traditional business measures ("will this business line increase sales this period vs the relevant prior period?"), these metrics (total unit sales, revenues, etc.) are correct.

But, for trying to predict the relevance and permanence of a sector ("are tablets a flash in the pan or are they a device with staying power?"), these are NOT the right metrics.

Regarding reduced year-on-year sales, tablets, and the iPad in particular, had huge initial sales because they answered the unmet demands for many people and there had never been a solution prior to iPad's release.  The dramatic improvements from iPad1, to iPad2, to iPad retina, and iPad Mini, all led to meaningful sales even to those who previously purchased earlier generations.  But, as many have pointed out, iPads are durable and capable devices so upgrades are less frequent, especially as incremental improvements have been less dramatic (iPad Air 2 v iPad Air 1 is a sharp example).

None of this means that the second meaning of market (the user base) is adversely impacted.  I'd bet that many iPad1s are still going strong and relatively useful.  iPad2s are definitely still useful (noting that they continue to be sold as the base iPad Mini!).  So, in terms of a growing user base, tablets look healthy.  Apple's own comment that most buyers are new suggests that this is the case (and helps to explain why, atypically for Apple, it continues to sell 3 year old hardware in the tablet space unlike any other).

I think we are close to the point of seeing what normal replacement cycles look like on iPad and should think more about household durables (washing machines and televisions) than phones or even computers.  It's probably a five year cycle and so will start seeing some meaningful growth in a few years as the pig of those first few huge years moves through the python.

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