It Doesn’t Look Like Apple’s iPad Will Be Able to Replace the iPhone

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For several years, Apple (NASDAQ: AAPL  ) jumped from one big product to the next -- from the Mac to the iPod, from the iPod to the iPhone, and from the iPhone to the iPad. Along the way, each product sold more than the last, faster than the last -- until the iPad.

Now, sales of the iPad are slipping -- Apple's tablet business appears to have peaked. Cheap tablets running Google's (NASDAQ: GOOGL  ) , alongside tablets running Microsoft's (NASDAQ: MSFT  ) Windows, may have put limited the iPad's growth.

An iPad Christmas?
Last quarter, Apple sold 14.1 million iPads. That's more than the same quarter last year, but only just slightly (100,000). In the prior quarter, Apple's iPad business actually declined, falling 14% on a year-over-year basis.

That stands in stark contrast to its other business segments. The iPod, for example, didn't peak in unit sales until Dec. 2008, about 7 years after its introduction. The iPhone business, now in its seventh year, is still growing (though sales do vary quarter to quarter).

In the past, Apple's management had boasted about the opportunity the iPad presented. CEO Tim Cook said that the market for tablets would be larger than the market for PCs, while many current iPad buyers were likely getting them in place of PCs running Microsoft's Windows.

On its most recent earnings call, Cook said he thought it would be an "iPad Christmas" this year and perhaps it will be. With the new iPad Air and iPad Mini with retina display going on sale, Apple has a chance to turn its iPad business around.

Good, cheap Android tablets are finally here
Apple's new iPads are the best in their class, but they're also expensive. Instead of a new iPad, consumers could opt for a tablet running Google's mobile operating system -- at a far lesser price.

Google's own Nexus 7, for example, starts at just $229, almost half the price of Apple's competing iPad Mini with retina display. Apple's tablet is objectively better, with a faster processor and slightly bigger screen, but is it $170 better? Alternatively, buyers could opt for Hewlett-Packard's $139 Slate 7, or one of HP's other upcoming Android tablets.

It took quite a while for tablets running Google's mobile operating system to catch on, but they certainly seem to have done so. According to IDC, tablets running Google's operating system finally surpassed Apple's iPad in terms of market share earlier this year, accounting for about 62% of the market last quarter from less than 40% in the prior year.

Don't ignore Windows tablets
Tablets running Google's operating system are the bigger threat, but devices powered by Microsoft's Windows 8 cannot be ignored. Last quarter, IDC reported that tablets running Microsoft's hybrid operating system represented about 4% of the market, up from an almost insignificant amount last year.

Microsoft's own attempt at a full Windows tablet is expensive -- its Surface Pro starts at $899 (not including the basically mandatory keyboard cover, another $100+). But its hardware partners have done better; Acer, Asus, and Lenovo all offer tablets running the full version of Microsoft's operating system for $300-400.

Then there are the convertibles. While technically still laptops, they may still be taking a bite out of iPad demand. If enhanced mobility is what iPad buyers have been after, the new class of hybrids running Microsoft's operating system provides it -- even if they aren't as mobile as Apple's devices.

The iPad isn't the next big thing
It doesn't look like Apple's iPad will be the next big thing. That isn't to say the iPad is doomed -- It could be a big business for a very long time to come. But the Windows PC killer that Apple's management once hinted at? Likely not. A combination of alternatives running Google's Android and Microsoft's Windows 8 seem to have stunted the iPad's growth. For now, Apple remains what it's been for the last few years -- an iPhone company.

When will Apple destroy the iPad?
Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.

Read/Post Comments (6) | Recommend This Article (1)

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 October 29, 2013, at 12:14 PM, JarJarThomas wrote:

    So you compare an ipad Quartal where the ipad was relative new (6 months 2012) to an ipad Quartal where the device was a year old (2013) and everyone expects a new ipad.

    And ALTHOUGH that was expected in 2013 and not in 2012 ... they sold more in 2013 ?

    So just reiterate

    Even IF people know there is a new ipad on the horizon, they buy more ipads now than a year earlier.

    So what do you think how many will buy an ipad if it is absolutely fresh ?

  • Report this Comment On October 29, 2013, at 12:31 PM, TerryShumway wrote:

    I can't figure out what Sam Mattera's point is.

  • Report this Comment On October 29, 2013, at 12:37 PM, larryw101 wrote:

    Another example of a worthless Motley article on Apple by Motley's in-house Apple basher, Sam Mattera. AKA, Sam, Sam, the Apple bashing man.

    Shame on Motley for this this highly biased so-called journalism !!

  • Report this Comment On October 29, 2013, at 1:29 PM, eldernorm wrote:

    "Good, cheap Android tablets are finally here"

    Yep, just look at most of the discount and reject sellers like Tigerdirect. I saw hundreds of android tablets for cheap. Most made by someone whom I have never heard of.

    Sam, ok, we get it, you hate Apple and wish them doomed.... Cool.

    But, really, just read the non-biased blogs and you will see that Apple seems to be trucking alone just fine.

    I will say, after all the crappy articles that I see on the Fool, I would NEVER take financial advice from anyone posting here.


  • Report this Comment On October 29, 2013, at 3:54 PM, DrKND wrote:

    MORE FUD-seeding myopia and bad intent! Shame on you Fool. And I agree with eldernorm who wrote "I would never take financial advice from anyone posting here."

  • Report this Comment On October 30, 2013, at 12:28 AM, chilero wrote:

    Apple shareholders, including myself, should be a little worried about failing to increase sales in a booming market. They are too quick to come up with the excuses around the lack of a new tablet.

    Instead of gaining new users they just appear to be reselling new models to the same people.

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