Apple's (NASDAQ:AAPL) iPad could be due for a turnaround. According to a report from Forrester Research, tablet sales may have plateaued, but the devices still have a future in enterprise. That should benefit Apple's iPad, as the company appears to be aiming its tablets at business users.
Forrester's projects a future for tablets in business
In the coming years, Forrester believes that tablets will become increasingly important for workers. Tablet demand is expected to grow only modestly through 2018 -- from 218 million this year to 250 million -- but enterprise tablets will generate the bulk of sales growth. Forrester notes that nearly one-third of businesses provide tablets for work currently, and that about half of employees use a tablet at least once per week. Forrester believes these figures will rise over the next five years.
That stands in contrast to the consumer tablet market, which could remain stagnant. Other research firms have come to similar conclusions. Last year, IDC said that enterprise demand could serve as a bright spot in an otherwise sluggish market.
Apple's enterprise play
Unfortunately, Apple's iPad business has been unable to defy the general trends in the tablet market. iPad sales have declined on an annual basis in each of the last six quarters as demand for Apple's tablet steadily erodes. The iPad remains a multi-billion dollar business (it generated $4.5 billion last quarter), but is now Apple's second-smallest segment, behind iPhone, Mac, and Services.
Apple's management seems to agree with Forrester's outlook. Its partnership with IBM appears to be centered around the iPad, and both CEO Tim Cook and CFO Luca Maestri have hinted at iPad's enterprise potential in recent earnings calls.
"I am still bullish on iPad," Cook said on the company's most-recent earnings call. "With iOS 9, there's some incredible productivity enhancements coming in with split view and slide over and picture-in-picture...The enterprise business is clearly picking up and more and more companies are either contracting for or writing apps themselves."
"iPad has also consistently been the number one tablet in enterprise," Maestri said on the company's April earnings call. "A recent Changewave survey found that among corporate buyers planning to buy tablets in the next six months, 77% plan to purchase iPads...we are seeing very high interest from companies who want to use iPads to transform how works get done."
Apple and IBM continue to release an ever-increasing number of enterprise apps for iOS. To date, they've released 35, and though there are plenty for iPhone and even Apple Watch, some -- including Loan Advise, Expert Resolve, Field Inspect and Shift Track -- are iPad exclusive. Businesses that wish to take advantage of this partnership and use the software must purchase iPads to do so.
It's also possible that Apple could soon release a tablet aimed explicitly at enterprise users. The long-rumored iPad Pro, believed to sport a screen larger than 12-inches, could launch later this year if recent reports are any indication. Supply chain sources have hinted at the iPad Pro since 2013, and a recent report from AppleInsider claims the device will be a 12.9-inch iPad with support for, among other things, a Bluetooth stylus. Consumers could opt for the over-sized tablet, but the bulk of demand is likely to come from business users.
The declining iPad business
Apple's declining tablet business hasn't had much of an effect on its shareholders. Over the last 12 months, shares of Apple have risen more than 25%, better than the near 5% return for the broader S&P 500. Strong demand for Apple's iPhone 6 and iPhone 6 Plus have boosted Apple's revenue and rewarded shareholders.
But the decline of the iPad is certainly painful, and puts additional emphasis on iPhone as the key driver behind Apple's earnings. iPhone now generates the majority of Apple's revenue, and any disappointment in that business takes a particularly large toll on shareholders. Earlier this month, Apple shares fell more than 5% after the company reported disappointing iPhone sales figures.
Apple doesn't need a booming iPad business to be successful, but if Forrester is right, its bet on enterprise should pay off eventually.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.