There's been an awful lot of hand-wringing over the future of the tablet market since Apple announced its earnings on Wednesday and revealed that it had sold only 16.35 million iPads during the quarter.
That's down from 19.48 million a year ago, and is the second time in the last four quarters that iPad sales have dropped from the previous year, as this chart from Macworld shows:
On Apple's earnings call, Tim Cook blamed the fall on inventory shifts. Apple reports sales to the channel, not to end users. A year ago, the company had increased its available inventory to the channel; this year it decreased it. Also, last year the company was pushing a lot of iPad minis into the channel to make up for high demand it couldn't meet during the 2012 holiday season; this time it did not.
This may all be true, but the iPad isn't a new product. Apple, with its well-oiled supply chain, should be able to adjust inventory based on demand. So the fact that Apple reduced shipments to the channel this year doesn't exactly scream demand is off the charts. Even if you take into account all the inventory adjustments and look at sales to end-users versus a year ago, sales were basically flat. Again, not great.
Over at ZDnet, Ed Bott uses figures from Gartner to make the point that while pure tablet sales may be slowing (though still growing), sales of hybrid devices -- which can be converted between tablet and laptop form factors -- are slated to grow faster, more than doubling. Maybe, but predictions are notoriously difficult to make and subject to post-facto revision, and hybrid sales are still slated to be way behind tablet sales in 2015 -- 62 million hybrids versus 349 million "pure" tablets. So it's too early to say that hybrids are stealing tablet market share.
Some (including me) have argued that the iPad is more like a PC than a smartphone, so it's bound to have longer refresh cycles -- people simply have no reason to replace their old iPad with a new one every two to three years, as wireless contracts encourage us to do with phones.
But Business Insider's Jay Yarow makes the point (previously raised by analyst Benedict Evans) that refresh cycle really only applies in a saturated market. The tablet market is far from saturated -- there are still hundreds of millions of people who've never bought a tablet. Apple (and other tablet makers) should still be able to sell iPads to those folks, and they're not. Yarow thinks the real problem is that most consumers just see much use for tablets. The smartphone is adequate for our portable needs, including sitting on the couch -- especially as companies like Samsung push for ever bigger screens. When you're not portable, or you need that extra power or a dedicated keyboard, the old PC will work just fine.
Where does that leave the tablet? As an uncomfortable in-betweener -- a place no product ever wants to be.
Here's my take.
First, I think the PC refresh cycle is relevant in the consumer market, because I think that the main avenue for growth there is consumers replacing worn-out old PCs.
Early adopters bought tablets in addition to their PCs, and found an "in between" use for them. But that first wave of adoption is over now. For most people, their last PC is good enough. As those PCs wear out, they'll replace them -- and I still maintain that most of those replacements will be tablets, not new PCs with keyboards. But the consumer PC refresh cycle is five to seven years. Not two to three years. In other words, the consumer tablet market is saturated -- with PCs.
The enterprise tablet market is actually where things get much more interesting. For the most part, I don't think tablets are going to replace PCs on desks, or laptops and smartphones for mobile workers. (To Ed Bott's point, I do think some mobile information workers who do a lot of keyboard-mouse work will be more likely to buy their own hybrids, then use them for both personal and work.)
However, as Box's Aaron Levie (among others) has pointed out, low-cost tablets have the ability to bring an information-processing device to more workers who never used one in their job before.
Think of factory floor workers. Delivery drivers. Retail. Hospitality. Airline pilots. Flight attendants. Health care professionals.
We talk to companies who are just starting to use tablets in this way all the time -- in preparing for the CITE Conference next week, I've spoken to two panelists who are now using tablets to replace old functions that used paper and pencil. In one case, the move improved time to service by a factor of 30. (We were talking on background so I can't offer more detail. Come to the show if you want to hear these stories in person!)
These are the kinds of productivity increases we saw when the PC first came out. Now, low-priced, lightweight tablets will bring those kinds of productivity increases to the millions of remaining workers whose jobs were never digitized before.
The iPad may not win this race, although Apple is sure talking up the importance of the enterprise. Android tablets may end up being cheaper, and easier to tweak to lock down for single functions. Microsoft is also making a push into this market with Surface.
But the market is real. It's there for the taking. And that's why I don't think tablets are anywhere close to dead yet.