Last quarter, Apple's (AAPL +0.33%) iPad business -- after suffering a long string of declines -- returned to growth; unit shipments were up 15% year-over-year and revenue was up 2% year-over-year.
That's not awe-inspiring growth, but if you consider that Apple's iPad unit shipments were still -- even after last quarter's performance -- down 8% year-over-year over the company's last three quarters (revenue performance was worse at down 10% in that time) -- it's an encouraging start.
Image source: Apple.
I think that Apple's iPad business has a real chance of delivering sustained, if rather modest, growth over the long-term, even if the overall tablet market remains weak.
Here's why.
Apple's tenacity
When Apple's iPad was growing like crazy, virtually every smartphone maker seemed desperate to try to get a piece of the tablet action.
That's not terribly surprising, as industry analysts published some rather impressive forecasts for where the tablet market was headed during the heat of the craze. Research firm IDC, for example, predicted in 2012 that in 2017, more than 352 million tablets would be shipped industry wide.
In February, IDC said that in 2016, worldwide tablet shipments came in at just 174.8 million -- down nearly 16% from 2015 levels.
That 2012 forecast missed by a mile.
Considering a worse-than-expected tablet market, many tablet vendors have cut back their investments in the product category, if not outright exited the market. Additionally, many of the remaining vendors appear locked in a race-to-the-bottom, with the focus being on cost rather than on innovation at higher price points.
Apple has, of course, begun to participate somewhat in this race-to-the-bottom by introducing its relatively low-cost 9.7-inch iPad, which starts at $329 for the base model. Unlike its competitors, though, Apple hasn't taken its foot off the gas in terms of iPad technology innovation.
Apple still develops applications processors tailored specifically to the needs and relaxed thermal/power constraints of its high-end iPad line; Apple's competition in the premium portion of the tablet market still use smartphone applications processors for their models.
Apple also brings new technologies to its iPad line first, including True Tone display technology with the 9.7-inch iPad Pro, as well as ProMotion display technology with this year's 10.5-inch and 12.9-inch iPad Pro models.
Additionally, Apple seems to be doubling down on building iPad-specific features into its iOS operating system, rather than redirecting its research and development efforts elsewhere.
All this indicates that Apple is thinking about iPad for the long term, rather than about the category in terms of the kind of near-term financial return that it'll drive.
To the extent that the tablet market continues to exist, I'm confident that Apple will soak up an increasing share of unit shipments, revenue dollars, and margin dollars.
Part of that is because Apple keeps treating the iPad as a first-class citizen, and part of that is simply due to the fact that the company's "competitors" can't be bothered to try to seriously compete with the iPad.
