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Is the iPad Losing Its Grip?

By Evan Niu, CFA - Nov 5, 2012 at 5:05PM

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Android rises.

Up until now, the tablet market could more aptly be described as the iPad market. Apple's (AAPL -2.46%) device has been ruling the roost, maintaining a market share that hovered near 70% over the past two and a half years since the first model was launched. The market has been playing out far differently from the smartphone market, where Google (GOOGL -1.35%) Android reigns supreme.

Android rises
Market researcher IDC has just released its third-quarter estimates on the state of the global tablet market, and the digits show that the iPad is losing its grip. The iPad now "only" has a market share of 50.4%, down from nearly 60% a year ago. The overall market is still young and growing, with worldwide shipments jumping 49.5% to 27.8 million units in the third quarter. Compare that to the nearly 88 million PCs that IDC said were sold in the third quarter, and you'll see that tablet disruption is just beginning.

Here are the top five players.


Q3 2012 Shipments

Q3 2012 Market Share

Q3 2011 Shipments

Q3 2011 Market Share


14 million


11.1 million



5.1 million


1.2 million

6.5% (AMZN 0.19%)

2.5 million





2.4 million









Source: IDC. N/A = not applicable; Amazon didn't ship first-generation Kindle tablets until Q4 2011.

IDC's research director of tablets Tom Mainelli said that Apple was negatively affected by continued speculation regarding its iPad Mini, causing some prospective buyers that may be interested in the smaller form factor to hold off on buying the regular iPad. That echoes statements that Tim Cook made on the most recent conference call. Mainelli also believes that the iPad mini's premium $329 price point leaves an opening for Android competitors to gallivant unsupervised below. However, the researcher thinks Apple will have a strong fourth quarter now that its updated iPad lineup has been released to the masses.

Much like in the smartphone market, the two top players on the hardware front are now Apple and Samsung. Android's South Korean champion saw shares skyrocket by over fourfold to 5.1 million units. This growth was attributed to strong shipments of Samsung's Galaxy Tab and Note 10.1, enough to earn it a second-place finish in the third quarter.

Since Amazon never gives investors real numbers to work with, instead touting vaguely impressive ones, we must always rely on third-party estimates like these to get an idea of where the e-tailer stands. The company launched the first Kindle Fire in Q4 2011, so we can't compare the current figures to the same period a year ago. The Kindle Fire HD was launched in mid-September, while the 8.9-inch version doesn't ship until later this month. The 9% share Amazon grabbed is particularly impressive since it was only shipping in the U.S. during the third quarter.

Google's Nexus 7 was a major contributor to Asus gaining ground, more than tripling its unit shipments to 2.4 million. Recent comments by Asus CFO David Chang imply that it may have shipped around 1.8 million Nexus 7 units. That's a very rough approximation that he gave, but it would roughly fit since Asus just posted a sequential increase of over 1.5 million units compared to its second-quarter shipments of 855,000.

Fashionably late or fashionable lately?
(MSFT -0.37%) Windows 8 devices were launched just last month, so devices related to that platform were nowhere to be found in the third quarter. The software giant is late to the tablet party, but its Surface tablet appears off to a strong start with launch lines and pre-order sellouts. The entry-level model remains out of stock on Microsoft's website.

The real test of the platform's long-term viability will be if Microsoft can quickly build its content ecosystem, since it's at a disadvantage on that front. If it can't, Surface may prove to be a short-term phenomenon.

There's more where that came from
The overall tablet market is growing so quickly that there's plenty to go around if companies can prove themselves. Despite a slip in Apple's market share, it remains king of the tablets by a healthy margin and its two most viable rivals launched new devices in the third quarter prior to its response in the fourth quarter.

With that in mind, it's entirely possible for the iPad maker to come back with a vengeance in the fourth quarter thanks to the iPad Mini and fourth-generation iPad.

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