iPad’s legacy seen falling short of iPhone

iPad Sales

Whereas the iPhone reinvented a category, the iPad define an entirely new one. Companies like Nokia had toyed with media tablets in the past, but they were nothing like the iPad Apple debuted in 2010. Companies raced to enter the new market Apple created with the iPad and while their early efforts were absolutely awful, they eventually morphed into the slates currently selling by the truckload. But despite the iPad’s significance in the broader consumer electronics market, one industry watcher thinks the device’s legacy will never measure up to Apple’s iPhone.

In a note to clients, UBS analyst Steve Milunovich wrote that Apple’s iPad has been a huge success and sales have grown even faster than iPhone sales did following its debut, but it will probably never be as significant to Apple as the iPhone.

“The good news is that the iPad’s take-up has been even faster than the iPhone’s,” Milunovich wrote in the note, which was picked up by Barron’s. “About three years after introduction, the iPad has tallied over $80bn in sales compared to the iPhone’s less than $50bn and more than double the units. The iPad benefitted from greater consumer familiarity with handheld devices, a lower ASP than the phone, and broader distribution. The bad news is that the rate of increase looks lower than that of the iPhone. A similar unit levels, it appears that the iPod is growing less quickly than the iPhone did. If we extrapolate current trends, the iPhone could overtake the iPod in cumulative revenue after five years from introduction at $170bn in sales.”

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He continued, “Our colleague Arthur Hsieh last week published new tablet estimates, commenting, ‘We are very surprised that the global tablet market shipment units do not have further upside to our prior estimates, yet PC units continue to decline.’ He fine-tuned 2013E/14E/15E global tablet units from 236mn/314mn/367mn to 235mn/301mn/367mn units, factoring in lower iPad units and higher Samsung and Lenovo shipments. Given little unit change and a greater ASP decline, tablet market revenue growth was cut from 26% to 21% in 2013 and from 29% to 17% in 2014. On our new estimates, Apple will grow less than the market as it has during F13.”

Milunovich’s notions are backed up by new IDC numbers released on Monday.

“With two new tablets anticipated over the next few quarters, perhaps the iPad is in a lull and will jump to a higher unit plateau as seasonality proves more important than saturation,” the analyst concluded. “Our view is that the iPad is being accepted faster but likely will not be as important as the iPhone over time. This story could play out in other new categories Apple proposes—a fairly fast benefit with rapid acceptance but a shorter half-life of earnings impact.”

Source:
Barron's
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