Apple's IPad Business Unexpectedly Fell Off A Cliff Last Quarter, So It Needs The New IPads To Be Great

Chart ipad iphone growthBusiness InsiderGrowth of the iPad as compared to growth of the iPhone starting four quarters after each product was launched (so we can measure year over year growth)

On Tuesday, Apple is hosting a big media event where it’s expected to reveal a new line of iPads.

The bigger iPad, which has had the same look since 2011, is expected to get a major redesign, making it thinner and lighter. The iPad Mini may or may not get a better screen. Reporters seem to think it gets a sharper screen, but analysts are sceptical.

The iPad refresh can’t come soon enough for Apple.

Last quarter Apple sold 14.6 million iPads, which was well short of expectations. Analysts were calling for 18 million units to be sold. The 14.6 million iPads represented a 14% year-over-year drop for Apple.

It’s possible Apple will post another drop in iPad unit growth this quarter. Morgan Stanley is calling for 13 million iPads to be sold, which would be a 7% drop on a year-over-year basis.

This would be a surprising turn of events for Apple and the iPad business. The iPhone has never had a year-over-year decline in unit growth.

When the iPad was still new, people like Mary Meeker were posting charts showing its crazy growth. It led a lot of people to believe that sales would continue to skyrocket.

Sales are not skyrocketing, they’re cooling.

Iphone ipad unitsBusiness InsiderUnits on a trailing 12 month basis, starting three quarters after the launch of each product.

Anonymous Apple pundit Sammy The Walrus IV noted this on Twitter, saying, “The iPad simply should not be having yoy unit sales declines this early in life. No other way around it. Too much success early on?”

That makes some sense. On a unit basis, the iPad blew away the iPhone in its early days.

Perhaps everyone that wanted one rushed out to buy it, leaving fewer buyers today. Or, maybe the iPad doesn’t operate on the same upgrade cycle as an iPhone. Perhaps people buy a new iPad every three or four years instead of every two. Or maybe the iPhone is so good that it replaces the iPad for most users.

Whatever the case may be, Apple better figure it out. The iPad is a key part of its business. In 2012, it was 20% of the company’s revenue.

Mark Glassman at Bloomberg Businessweek argues that iPad revenue is perhaps more important for the company’s stock than the iPhone. “Quarterly iPad revenue has a 68 per cent correlation with Apple’s share price. That’s higher than the stock’s correlations to iPhone revenue (62 per cent) or Mac revenue (40 per cent).” (Correlation isn’t causation, of course, but still interesting.)

When Apple is rolls out new iPads on Tuesday, it better have something to get unit sales growing again.

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