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As iPad sales slump, Cook hijacks analysts' fast-uptake explanation

Gregg Keizer | April 25, 2014
Apple on Wednesday conceded that it sold 16% fewer iPads in the March quarter than in the same period last year, fulfilling analysts' expectations -- in spades -- that iPad sales have slowed.

Apple on Wednesday conceded that it sold 16% fewer iPads in the March quarter than in the same period the year before, fulfilling analysts' expectations — in spades — that the company's tablet sales have slowed.

Wall Street had expected significantly larger iPad numbers, but still figured Apple would record a slight downturn.

Instead, Apple did much worse than analysts anticipated: The company sold 16.4 million iPads in the quarter, down more than 3 million compared to the first three months of 2013.

CEO Tim Cook tried to downplay the downturn yesterday. "iPad sales came in at the high end of our expectations," he said (emphasis in original). He blamed the disconnect between Apple's internal estimates and those of Wall Street on the disparity between what was in the pipeline last year and this year.

"In the March quarter last year, we significantly increased iPad channel inventory, while this year we significantly reduced it," Cook said. "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."

If those in-pipeline iPads were discounted, claimed Cook, the decline for 2014's March quarter was only 3%.

"I completely buy Tim's explanation of the gap," said Van Baker, an analyst with Gartner, in an interview Wednesday after Apple's earnings call. "But still, if you look at sell-through, it's been down and down. That's bad news for the iPad."

Cook refused to look on the dark side of things, saying he remains bullish on the iPad. "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," he said.

He also cited a string of iPad statistics to bolster his view, saying that the iPad has been Apple's fastest-selling product line ever: At 210 million tablets in four years, the company sold was twice as many iPads as it did iPhones in the latter's first 48 months, seven times what it booked in iPod sales in the same timeframe.

Carolina Milanesi, chief of research at Kantar Worldpanel ComTech, keyed on Cook's comments as she digested the iPad numbers, and like other analysts before the earnings call, argued that the rapid rise of the iPad was to blame for slower sales now.

"I think that's key to understanding [what's happening now]," said Milanesi. "The uptake was really, really sharp. Everyone thought it was going to take much longer."

The iPad's initial growth — bolstered, Milanesi pointed out, by Apple's first-mover position and a resulting dominance early in the tablet wars — of triple digits through 2011 and into early 2012 was clearly unsustainable.


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