Over the past six months or so, the idea that Apple's (NASDAQ:AAPL) new iPhone 6 Plus is cannibalizing iPad sales has gained widespread acceptance, to the point where it is now conventional wisdom.
However, Apple-watchers should recall that just a couple of years ago, it was equally accepted that the PC was doomed due to the rise of the iPad and other tablets. That prediction turned out to be premature, at best, and possibly wrong altogether. PC sales stabilized in 2014, while tablet sales stumbled.
Similarly, the claim that people are dumping their iPads in favor of the iPhone 6 Plus may turn out to be more rhetoric than reality. iPad sales are down in the dumps, but it's not really because Apple released a bigger iPhone, and it may not be a permanent problem.
The iPad falls by the wayside
It's no mystery why so many people think that the introduction of the iPhone 6 Plus is killing iPad sales. iPad demand slowed significantly last year, with the declines accelerating toward the end of the year. At least one highly respected analyst expects the iPad sales trajectory to get even worse in 2015.
At the same time, the introduction of the larger iPhone 6 and iPhone 6 Plus last fall is driving massive growth for Apple's iPhone product line. iPhone unit sales jumped 46% last quarter and iPhone revenue skyrocketed 57%.
It's natural to connect these two trends. But while the iPhone 6 Plus may be stealing some iPad sales on the margins, the connection may be more tenuous than many people realize.
iPad sales were already falling
First, it's important to remember that iPad sales growth was petering out long before the iPhone 6 Plus showed up. The first iPad year-over-year sales decline occurred in the June-ended quarter of 2013. That was more than a year before the iPhone 6 Plus went on sale.
Since then, there's only been one quarter of robust iPad sales growth: the December-ended quarter of 2013. Unit sales fell in every quarter of (calendar) 2014. The timing of the iPad sales slowdown doesn't really line up with the arrival of the iPhone 6 Plus.
The iPhone 6 Plus isn't really an iPad substitute
Second, the idea that the iPhone 6 Plus is a great substitute for an iPad is overstated. An iPad Mini has roughly twice the screen real estate of an iPhone 6 Plus -- and a full-size iPad is about 3 times its size.
For many of the things that people like to use iPads for -- reading books, watching videos, and even browsing the web -- you're going to want that extra screen space. A 5.5-inch phone might be better than a 4-inch phone, but it's still not nearly as good as a tablet.
The situation may be somewhat different in the Android world, where lots of "phablets" have 6-inch screens and small tablets typically have 7-inch screens. That allows for much more blurring of the line between phone and tablet.
Which iPad models are selling?
A third consideration is that the mix of iPads being sold doesn't line up with the theory of massive cannibalization by the iPhone 6 Plus.
It stands to reason that the iPhone 6 Plus would cannibalize sales of the iPad Mini more than sales of the full-size model. But iPad usage has been shifting toward the "Mini" models.
In the week before the iPhone 6 Plus went on sale, 27% of all iPad usage came from the iPad Mini and the iPad Mini 2, compared to 73% coming from full-size models, according to data from Fiksu. Now, more than 29% of iPad usage comes from the Mini models, while less than 71% comes from full-size iPads.
Granted, this is a relatively subtle shift, but it suggests that the full-size iPad may be the weaker link now. That doesn't make sense if the main problem with iPad sales is cannibalization from the iPhone 6 Plus.
What's really going on?
So if the iPhone 6 Plus isn't the big reason behind weak iPad sales, what's the problem? One factor that shouldn't be overlooked is the slow replacement cycle.
iPad sales surged to 58.3 million by the second full fiscal year of sales. By contrast, Apple only sold 20.7 million iPhones in its second full fiscal year of sales. Annual unit sales didn't pass 58.3 million until the iPhone had been on sale for four years.
Thus, Apple penetrated a big chunk of the iPad market opportunity in the first few years of sales. Many of those relatively early adopters who bought iPads between 2011 and 2013 haven't needed to replace their iPads yet. (The iPads released in late 2013 and late 2014 represent only 30% of the installed base.) As users finally start to replace their old iPads at a steady rate, sales should stabilize and then rebound.
Another (related) issue is that Apple hasn't made any revolutionary advances with the iPad lately. The most recently released models offered very modest upgrades over their predecessors, and sales have been correspondingly light.
Still, this means that a combination of time and innovation could get iPad sales back on the right track. (A greater foray into the corporate market, thanks to Apple's budding partnership with IBM would also help.) That's much better than the alternative that the entire category is doomed due to the introduction of the iPhone 6 Plus.
Adam Levine-Weinberg is long January 2016 $80 calls on Apple, short January 2016 $120 calls on Apple, and short January 2016 $140 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.