Apple, Inc.'s iPad Isn't Living Up to Its Potential

The current iPad lineup is missing something. Source: Apple.

The iPad has sold like gangbusters since it was first launched, but as tablets have become nearly ubiquitous Apple (NASDAQ: AAPL  ) and its competitors are looking for new ways to tap existing markets. Samsung (NASDAQOTH: SSNLF  ) is looking to the professional tablet niche to grow its market share, and it's time Apple did the the same.

Room for improvement
The latest Gartner research shows the Android OS experienced 127% growth in 2013, and now holds 62% of the tablet market. Meanwhile, Apple's iOS dropped from 52.8% tablet share in 2012 to 36% in 2013.

Galaxy Tab Pro. Source: Samsung.

Despite the drop, Apple isn't necessarily in trouble. The iPad maker had an incredible calendar fourth quarter, selling a record 26 million iPad and iPad Minis. That number is up from 22.9 million year over year.

But despite Apple's recent quarter, there's still some room for improvement. In 2013, tablet growth in emerging markets was 145%, while mature markets eked out just 31%. Apple isn't likely to release a low-cost tablet anytime soon, so instead the company needs to find new ways to get saturated markets to buy new versions of the iPad. And achieving this might be as easy as following the competition.

Last month, Samsung launched pro versions of its Galaxy Tab and Note tablets. The largest-sized 12.2-inch tablets are supposed to be more productive versions of the non-pro lineup, and function as a computer replacements for some. But whether Samsung's new pro line lives up to this ideal or not isn't quite the point. Samsung has helped fill in a niche market that only has one other serious competitor right now, and it's not Apple.

Surface Pro 2. Source: Microsoft.

Microsoft (NASDAQ: MSFT  ) is arguably the first company in the pro tablet space. The Surface Pro, which launched last year, and the new Surface Pro 2 both are touchscreen tablets that run full versions of the Windows operating system. Despite the initial lackluster sales of the first versions of the Surface lineup, Microsoft's tablet revenue more than doubled this past quarter, sequentially.

While Microsoft holds a minuscule 2% of worldwide tablet market share right now, there's a serious case to be made for its Pro lineup that run full versions of Windows programs.

For many people looking for a computer replacement, the Surface Pro and the Samsung's Note and Tab Pro capabilities make them the best, and only, options right now.

Unless Apple decides to change this.

Beating the competition at its own game
While it's arguable that Apple's iPad Air is already professional-grade, the company could benefit from increasing some of the Air's capabilities and launching an iPad Pro later this year.

Samsung is the No. 2 tablet vendor right now and experienced 336% tablet growth this past year. Those are two things Apple can't ignore. 

Here's what Gartner had to say about Samsung's growth:

The expansion and improvement of its Galaxy tablet portfolio, together with strong marketing and promotions, helped Samsung shrink the gap with Apple. In line with its smartphone approach, Samsung's oversegmentation of its tablet portfolio helped it to offer a wider size and price choice but also helped it to test the market and find niches.

Samsung and Microsoft have tested out new markets, and now it's time for Apple to swoop in and build out those potential markets.

Apple has hinted (possibly) to a forthcoming iPad Pro release with its new 64-bit "desktop" architecture in the iPad Air, challenging developers to create apps that are just as capable as desktop programs. Another hint came when Apple decidedly kept the iPad 2 around when it launched the Air. The company typically has two versions of its devices, not counting screen sizes. Think iPhone 5c and 5s, iMac and Mac Pro, MacBook Air and MacBook Pro, and eventually the iPad Air and iPad Pro.

With the company's solid fiscal first-quarter iPad sales, Apple isn't currently in any tablet danger, but it's missing a new niche by not selling pro versions of the iPad. And with Samsung quickly growing its tablet share, and firmly in the pro tablet space, investors should be looking for a professional-grade tablet from Apple later this year.

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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 March 04, 2014, at 12:44 PM, cluelessnow wrote:

    Why all the negative articles come out when Apple is trying to break above pertinent technical levels? Extremely suspect if you ask me!

  • Report this Comment On March 04, 2014, at 12:46 PM, twolf2919 wrote:

    I wish analysts stopped parroting studies without actually looking at them critically first. In this case, the Gartner study has already been criticized for its veracity:

    (1) The study provably underreported iPad sales by over 3 million units (I believe they said 71 million iPads were sold - even though Apple officially reported 74+m sales.)

    (2) Over half of the 121m non-iOS tablets sold, were "Other" - i.e. white-label, no-name brands. If Gartner can't even get the number of Samsung tablets sold (see #3 below), how could it be trusted to have accurately accounted for this half of tablets?

    (3) Apple is the only company that reports the actual number of tablets sold - everyone else just reports "shipped". Therefore the 71m iPads sold (which is actually 74m) compares to 121m tablets that are in users hands, on store shelves, or in warehouses. Not a very fair comparison, is it?

    In summary, this is another article trying to stir the pot - not much else.

  • Report this Comment On March 04, 2014, at 1:22 PM, OpenThreads wrote:

    "Despite the initial lackluster sales of the first versions of the Surface lineup, Microsoft's tablet revenue more than doubled this past quarter, sequentially."

    So, last year Microsoft sold 10 surface tablets and this year they sold 21?

  • Report this Comment On March 04, 2014, at 1:42 PM, guest1 wrote:

    There is nothing pro about the iPad or larger Galaxy tab. The iPad mini is gaining volume at the expense of the air so why would releasing a 13" iPad make things better? At that size it no longer makes sense to buy a tablet but instead buy a better touch enabled laptop because all pros need to type, alot. The iPad pro if it gets released will be priced at a premium, add in a bluetooth keyboard, extra storage and you are looking at the same price for a full windows 8 laptop or even a macbook air both of which are more useful for a pro than a larger iPad. We haven't even gotten to the software that a pro would use such as SAP, office etc. App writers would do what port over SAP and charge $3k to download the app? If you don't get the full version what's the point? At the end of the day this segment of the market doesn't make sense for apple or any other tablet maker. The tablet will always just be a companion to the laptop adding "Pro" to the end of the product name will never change that.

  • Report this Comment On March 04, 2014, at 2:10 PM, chrischamb1 wrote:

    Stupid article that rehashes other's comments and faulty studies. CAN ANYONE AT MF ACTUALLY COME UP WITH AN ORIGINAL THOUGHT?? All that I have to say is Keep Bashing Apple!! Sell all your stock...Short Short Short. Then, in 2 years, see where the company and the stock are at. Just Sayin...

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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