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I Was Wrong About Apple, Inc.'s iPad

By Evan Niu, CFA – Dec 21, 2015 at 2:15PM

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For a little while, it looked like the iPad could become Apple's primary revenue driver. It turns out it's really hard to dethrone the iPhone.

iPad Pro. Image source: Apple.

A long time ago on a website very close to here, I made a prediction about Apple (AAPL 3.25%). It was 2013, three years after the first iPad was launched, and at the time the new tablet was seeing adoption soar faster than any Apple product before it. Yes, even faster than the iPhone.

Meanwhile, I had observed that throughout Apple's history, different products have taken turns being the primary revenue driver over the years. Every time that Apple entered a new product category, that new product category would soon become the primary sales driver. The Mac, iPod, and iPhone each took their respective turns, although the iPod's turn was relatively short-lived. These inflection points came every few years, and I believed that the iPad was well on its way to becoming Apple's next big revenue driver.

I was wrong.

A trip down memory lane
At the time, I put together two charts based on historical data as evidence for this argument. First was how the primary revenue driver had changed over the years.

Source: SEC filings. Fiscal quarters shown. Primary revenue driver changes shown in circles. Data as of January 2013.

And I looked at how iPad unit sales had taken off faster than any product before it.

Source: SEC filings. Data as of January 2013.

It didn't seem that far-fetched considering the trajectories at the time, although with the benefit of hindsight it was perhaps too early to call since the iPad had only been available for three years. In the nearly three years since that prediction, things have changed. A lot.

Back to the future
Apple has since stopped reporting iPod results, as the music player's financial significant has expectedly withered even further. But here's how the Mac, iPhone, and iPad stack up in relative importance, as measured as a percentage of trailing 12-month sales.

Source: SEC filings. Fiscal quarters shown.

As you can see, the iPhone has only gotten stronger and more dominant as the primary revenue driver, currently comprising two-thirds of TTM sales. The Mac and the iPad are at 11% and 10%, respectively. While we're at it, here's an updated chart of unit volumes following launch.

Source: SEC filings.

After the iPad sprinted out of the gate initially, unit sales have been trending lower for the past couple of years, while the iPhone continues to march skyward.

At this point, it doesn't seem that the iPad will ever have a chance at being the primary revenue driver. Not that the iPad really has to, but I just thought it would. All of Apple's product lines are highly complementary and incrementally feed into its broader ecosystem, and while the iPad has seen better days, it still has opportunities ahead. The iPad's not going anywhere.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. 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.

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