According to Wal-Mart's Thanksgiving sales figures, the iPad mini was one of its top sellers. The company reports it sold more than 1.4 million mobile computing devices, a large portion of which were Apple's (AAPL +2.91%) minature devices. Furthermore, online auction site eBay tweeted that it was selling an iPad every second. In light of such gaudy stats, should Apple investors be rejoicing?
Not quite yet.
2013 iPad demand
The International Data Corporation estimates that 47.6 million tablets were sold in the third quarter of 2013. Of these, only 14.1 million were Apple iPads. This was a 3% decrease from the 14.6 million sold in the second quarter second and was less than a 1% increase over last year's figures. As a consequence, Apple's global tablet market share has fallen to 29.6%, the lowest it has been in company history.
This decrease in demand is attributable to two causes. First, Apple chose not to launch its new products until recently. Therefore, volume was stale throughout the earlier part of this year while consumers waited for a refresh. Second, many other competitors entered the market, offering lower priced goods.
Samsung (NASDAQOTH: SSNLF) grabbed 20.4% of the global market share by bundling its Galaxy Tablet with other successful products including its smartphones and televisions. Asus took a 7.4% market share selling the Nexus 7 tablet for Google (GOOG +1.28%).
While Apple's sales are on the decline, companies like Samsung and Google are seeing accelerating increases in sales. In a tablet industry that is growing 36% year over year , these two should continue to enjoy rising sales.
Why Apple has a problem
Given this sub-par iPad performance, Apple investors should be holding their collective breath hoping current sales continue throughout the end of the fourth quarter. If they do not, the company could post final sales figures barely higher than last year.
If this turns out to be the case, Apple will find itself in a precarious position. It will have to face the fact that its premium pricing strategy is losing traction and may have to consider lowering prices.
In the 7 to 8-inch tablet market, Apple's second generation iPad Mini starts at $399. Comparatively, Samsung's Galaxy Tab 3 starts at $279.99 and Google's Nexus 7 starts at $229. Furthermore, in the 9 to 11-inch tablet market, Apple's iPad Air starts at $499, whereas Samsung's Galaxy Tab 3 costs $359.99 and Google's Nexus 10 costs $399.
| Tablet size |
Apple |
Samsung |
|
|---|---|---|---|
|
7-8" | |||
|
Starting price |
$399 |
$279.99 |
$229 |
|
9-11" | |||
|
Starting price |
$499 |
$359.99 |
$399 |
Source: arstechnica.
On the other hand, Apple's appeal lies within its branding. Although many of its products are not far superior to those released by competitors, Apple has positioned itself as a premier manufacturer. If it does lower its prices, it may decrease the value of its brand, which could result in a long-term erosion of company value.
Why investors should care
Ultimately, investors need to keep a close eye on Apple's iPad sales throughout the fourth quarter. If the results are unimpressive, investors must accept that Apple will find itself in a lose-lose situation. Though the company is not facing immediate peril, this holiday season's shopping figures should prove quite telling.
