Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Apple's Japan Tablet Sales: A Precursor of Things to Come?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

With the much-ballyhooed decline in Apple (NASDAQ: AAPL  ) shares lately, everyone has an opinion of what's going on in Cupertino. Is the ghost of Steve Jobs less than enamored with new CEO Tim Cook? Maybe it's something closer to reality, like recent margin pressures, or increased competition across Apple's entire lineup?

The fact is, Apple's problems aren't the result of some other-worldly interference -- the explanation is much simpler than that. Apple has tied its cart to the iPhone horse, and those market dynamics have changed drastically this past year, and aren't going to stop changing anytime soon. With too little revenue -- and even less profit -- coming from non-iPhone sales, Apple's found itself in a precarious position: Diversifying revenue opportunities, without cannibalizing existing sales.

The word from Japan
According to a recent study , the words most often used in Japanese electronics stores in December were: 'I'll take a Nexus 7, please." Research firm BNC conducted an electronics store calling campaign throughout Japan to gauge tablet sales at 2,400 retail outlets during the busy December shopping season. The results were surprising and, for Apple fans, a possible precursor of things to come.

For the first time since May 2010, when Apple began selling iPads in Japan, Google's (NASDAQ: GOOGL  ) Nexus 7 tablet alternative has taken over the top spot in the market. The Nexus commanded 44.4% of Japanese tablet sales in December, while Apple's piece of the pie dropped to 40.1%. There are two primary reasons for the change at the top in Japan: number one, price . The Nexus retails for about $200 in Japan, compared to $300 for the iPad Mini, and $500 for an iPad. Price is a concern for Apple that's going to manifest itself in the smartphone market, too.

Reason number two is the release of Apple's iPad Mini toward the end of last year, which caused some inventory problems, and may also have cannibalized sales of previous iPad versions, skewing the survey's final results. We'll need to wait and see what impact not having readily available iPads in stock had on December tablet sales, but the message is clear; in Japan, at least, consumers are ready and willing to explore alternatives to Apple, particularly when price is part of the equation.

Takeaways for Apple
Inventory problems played a part in Apple's drop from the top in the Japanese tablet market, but it's the price difference between iPads and Nexus that made all the difference, and that should be an eye-opener for Apple. Microsoft (NASDAQ: MSFT  ) can also use Google's ascension in Japan as a learning experience. Microsoft's foray into tablets -- its Surface device -- goes head-to-head with Apple's iPad, and shares one, indisputable flaw: cost.

With a starting price of $499 for Surface, Microsoft, just as with Apple, assumes it can get consumers to spend two or three times as much than a lower-end Google, or Samsung Galaxy, tablet. But, as more and more tablets hit the market, and the lines between the alternatives become even more blurred, Apple and Microsoft will both find themselves fighting the same, uphill battle. Don't be surprised to learn that Microsoft's Surface sales were muted, when CEO Steve Ballmer finally opens up about Surface sales -- and its price point will be the reason why.

The survey of 2,400 electronics stores, and subsequent upending of Apple's top spot in the Japanese tablet market, isn't the end of the world. After all, we're talking about a total of approximately 3.6 million tablets last year, and expected sales of 4.9 million units in 2013 – chicken feed for Apple, right?

Unfortunately for Apple, giving up the number one spot in Japan's tablet market is indicative of larger concerns: namely, spreading revenues and profits across multiple business lines vs. today's reliance on the latest, greatest iPhone. Another is developing lower-cost alternatives in the mobile computing space, including Apple's smartphones and tablets.

Japan's tablet sales won't make or break Apple, but investors would be wise to heed the message it sends.

Apple has been a longtime pick of Motley Fool superinvestor David Gardner, and has soared 215% since he recommended it in January 2008. David specializes in identifying game-changing companies like this long before others are keen to their disruptive potential, and he helps like-minded investors profit while Wall Street catches up. I invite you to learn more about how he picks his winners with a free, personal tour of his flagship service, Supernova. Inside, you'll discover the science behind his market-trouncing returns. Just click here now for instant access.

Read/Post Comments (17) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 17, 2013, at 9:27 PM, TJPColeridge wrote:

    Let me see if I understand your worries. Samsung market share for tablets has increased to 44% over Apple's 40%, and they've accomplished this by selling low-margin $200 tablets. And in spite of that competition, Apple is still able to retain 40% of the market on tablets that cost at least $129 or $300 more, with much fatter margins. And this is bad? Well, I suppose it could be bad if Apple's absolute sales (not market share) were decreasing, but those numbers aren't presented.

  • Report this Comment On January 17, 2013, at 9:35 PM, Stonesand wrote:

    Apple appears to be making the same mistake it made with the Mac computer.

    Price is too high. When you sell a product, you need to know two things about the criteria that consumers use to evaluate between or among alternatives. One is what are the criteria purchasers use (price, features, warranty etc.) and what are the relative rank of those same criteria.

    It is becoming clear that price is very important and that Apple is losing ground to cheaper alternatives in the smartphone market and also the tablet market.

    It is resisting this fact but is at serious risk in doing so. Cheaper alternatives are eating into its market share in a significant manner. It does not have the phone or tablet market to itself as it once had in e iPod market.

    It's the same mistake Steve made with the Mac twenty years ago. It was left with a great product but had only less than 5% of the market.

    Too bad. And I bought a Mac in 1984 and have been an Apple fan ever since.

    Dave Enns

  • Report this Comment On January 17, 2013, at 9:38 PM, matthewluke wrote:

    Nexus 7 retails for about $265 in Japan, not $200. iPad Mini at $320 and iPad at $388. And that is with the current weaker yen. Cost even more relative to the dollar a few months ago.

  • Report this Comment On January 17, 2013, at 9:42 PM, MrRuprect wrote:

    Your article should read "Japan: A precursor of things to come" (If ipads are not available due to supply constraints) The fact is apple has proven to be the tablet of choice around the world over all the other tablets regardless of price. But in Japan there's an anomaly with the sales. Earnings will prove direction of ipad sales, to what degree cannibalization is a factor, and if whether the iphone 5 is as doa as all the analysts' and reporters are claiming. Apple has proven them wrong in the past, we shall see.

  • Report this Comment On January 17, 2013, at 9:45 PM, JesusQuintanaJr wrote:

    I did some research on this study and came across this:

    "A new report from a Japanese publication named Nikkei claims that Apple’s iPad sales in Japan this holiday season were beaten by sales of Google’s Nexus 7. The report cites a survey from Japanese market research firm BCN."

    So the same people who reported the very dubious claim picked up by the WSJ that Apple cut orders due to weak demand are also the ones who reported this study. Not sure how credible this report is.

    Wednesday can't get here fast enough.

  • Report this Comment On January 17, 2013, at 9:47 PM, TimKnows wrote:

    Apple is going to crash in 2013, they have nothing new to offer consumers.

  • Report this Comment On January 17, 2013, at 9:51 PM, BenKeel wrote:

    I've made good money doing the opposite of Motley Fool and its' college students.

    I went short on US Steel last year when they LOVED it! I made a nice chink of change.

    I think long Apple now is the answer to this article.

  • Report this Comment On January 17, 2013, at 9:59 PM, artlaz wrote:

    iPad Mini was severely supply constrained last quarter. Check the numbers when both tablets are equally available.

  • Report this Comment On January 17, 2013, at 10:05 PM, JesusQuintanaJr wrote:

    BCN had a report out last year claiming the Acer Iconia Tab A-500 was outselling the iPad 2.

  • Report this Comment On January 17, 2013, at 10:15 PM, TedCranmore wrote:

    Sorry, some foolishness indeed in the article.

    " and those market dynamics have changed drastically this past year, and aren't going to stop changing anytime soon. With too little revenue -- and even less profit -- coming from non-iPhone sales,"

    And how have they changed? Yes, iPhone is losing share in worldwide numbers as super cheap Android phone soak up emerging market users switching from feature phones. While this affect market share numbers, it does little to revenue share, and even less to profit share.

    There are only two players in the smartphone world today -- Samsung and Apple. Samsung does some high end and is doing a good job soaking up the low end. Apple is doing a great job on the high and has no interest into the part of the market that has no margin. This will cause them to lose meaningless market share points in the coming years without affecting earnings. While small as a percentage, Apple will be happy to grab the smaller percentage of middle and upper class Chinese who want an iPhone. Looks bad on market share, great on profit share and allows Apple to grow because this many middle class Chinese is still a huge number of buyers.

    Any article that only mentions market share is rookie fodder. Revenue share and profit share need to be addressed at the same time. Today, Apple has 2/3 of the smartphone profit share, and Samsung 1/3. All the rest are fighting for table scraps that may not be worth it in the long term.

    "With too little revenue -- and even less profit -- coming from non-iPhone sales,"

    What? If iPad was a separate company, it would be the 11th largest tech company in the US! It's growth curve is ramping faster than iPhone did. The PC market is stepping back and the tablet market is coming forward. As easier to use devices, they will soon sell even more than the 300 million unit that the PC represents today as non-technical user enjoy the devices and families consider it a personal device that every members owns with time.

    It's true that Apple growth will be slowing in the coming months, but it's also true that it had to because it was growing an stupidly high levels that would have to reduce. The question is does Apple still grow well as compared to other companies. When the question is asked this way, AAPL appears to be one helluva an investment at current levels.

  • Report this Comment On January 17, 2013, at 10:15 PM, never2dull4u wrote:

    It's halirious that when the sentiments changes on APPL stock, the doomsayers think they have Apple all figured out.

    DUDE! Nothing has changed. Fundamental is still intact, It's just the sentiment and the bashing of soup du jour seems to be the headlines these days.

    I remembered when bloggers were bashing GOOG when their stock dipped to $500ish during the summer months of 2011. Where are they at now again...?

    Good stocks dont stay low this long. Especially for a company with PPE of under 10 and $130B in cash in the bank.

    Why dont' we all sell Apple and buy Amzn at this level, right...?

  • Report this Comment On January 17, 2013, at 11:30 PM, RadarTheKat wrote:

    Oh my lord these analysts get it wrong more often that they go to the bathroom.

    It's really quite simple. Let me explain. When a new product like the iPad mini comes out and changes the demand for an existing product like the full size iPad, and availability of the new product is limited, then those seeking the new product will go directly to the source in order to secure access to it. In other words, those folks in Japan who were clamoring for an iPad mini ordered it directly form Apple, or when directly to one of Apple's seven retail stores in Japan to get one. They didn't wait until the mini eventually showed up in one of those 2400 surveyed electronics outlets in sufficient quantities to ensure that they're visit to the outlet would't be in vain (i.e. inventory sold out). With all those consumers flocking directly to Apple, that leaves only the uninformed (representing the 40.1% number from the survey) along with those who weren't going to purchase an iPad anyway (the 44.4% from the survey) being polled in those 2400 electronics stores. Those who might normally shop their local electronics outlet but who were sufficiently savvy to order online from Apple or go directly to an Apple store (or decided to wait until all the frenzy calmed down) are simply not counted in the survey. Clearly not those who ordered online as the survey takers would not have been able to reach them and clearly not the ones at the Apple stores as it's doubtful that anyone at an Apple store would respond that they were intending to purchase a Nexus, as the Nexus isn't sold in Apple stores.

  • Report this Comment On January 17, 2013, at 11:49 PM, Nomadder wrote:

    You know what's also really popular in Japan? Yahoo. People here are just now figuring out what Google is.

    Facebook? That's a recent thing too.

    Also, the Xbox 360 sells here like it's made of cockroaches.

    Debit cards are not usable online, in most stores, or even at most ATMs (outside of your particular bank).

    Those ATMs? They close down at 8:00.

    Folks still use Mini-Disc, Nyquil is illegal, and I don't think they've ever heard of insulation.

    All I'm saying here is that Japan is Japan and that's it. Extrapolating from Japan to anywhere else, but especially Western nations, is a really, really bad idea.

    Apple may fly, float, or sink but Japan is the last place you should be looking to for signs of which it's gonna be.

  • Report this Comment On January 18, 2013, at 12:27 AM, SimchaStein wrote:

    Too much extrapolation and incorrect source info. Apple will report excellent quarterly results. As for the future, NO ONE KNOWS. All are guessing. And the stock is highly discounted for that uncertainty.

  • Report this Comment On January 18, 2013, at 12:32 AM, SimchaStein wrote:

    The obsession with market share is mis-guided. I'm a firm believer that market share is more important than margin in most cases. But in Apple's case, they have more than enough market share, to reach cost/supply chain leverage and cost reductions, and product development. They don't have to reach every price point, feature, form factor, etc.

  • Report this Comment On January 18, 2013, at 2:01 AM, Pngoetz wrote:

    I read German Version of this article. This version omits the fact that the survey had lot of potential problems:

    - apple stores where not part of the survey!!! Japan is full of apple stores so it is likely if you wanted to buy ipad and you have a choice btw ipad and ipad mini you go to an apple store to buy it.

    Anyway, not sure why this important piece of information was left out.

    Regards, jana

  • Report this Comment On January 18, 2013, at 10:25 AM, michaelkm88 wrote:

    Hmm lets do the numbers. Assume 1000 tablets for the sake of ease.

    Nexus 7 @ $200 and 44% M.S.= 440 tablets sold for $88000.

    Apple Mini @ $300 and 40.1% M.S.= 401 tablets sold for $120300.

    Apple Ipad @ $500 and 40.1% M.S- 401 tablets sold for $200500!!!!!


Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2202883, ~/Articles/ArticleHandler.aspx, 9/25/2016 1:58:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
AAPL $112.71 Down -1.91 -1.67%
Apple CAPS Rating: ****
GOOGL $814.96 Down -0.99 -0.12%
Alphabet (A shares… CAPS Rating: *****
MSFT $57.43 Down -0.39 -0.67%
Microsoft CAPS Rating: ****