Putting iPad Sales in Context

Wednesday, 25 April 2012

Alexis Madrigal, writing for The Atlantic, calls the 11.9 million iPads sold last quarter “The One Fly in the Apple-Earnings Ointment”:

So, let’s call attention to the one key area where Apple didn’t beat estimates: iPad sales. Analysts were estimating about 13 million units sold, although the range seemed to go from about 9 million to about 15 million units. Turns out that apple sold 11.9 million iPads in the last quarter.

That’s a ton of tablets and it’s a massive year-over-year increase, but we’ve been talking about iPads as if they were the future of computing. Yet in a quarter with a new iPad launch, Apple managed to sell 12 million units worldwide. I don’t want to overpredict based on one number, but I’ve had a nagging sense from my own spotty iPad usage that the devices may remain a luxury. They don’t quite replace your computer and they’re not as mobile as your phone. What if the incredibly enthusiastic, urban, travel-all-the-time iPad early adopters actually have very different needs from the broader mobile computing market? What if beyond the perfect world travelers, the price is just too high for what you get? What if the upgrade cycle is going to be much, much slower than for phones?

It’s a severe mistake to get this caught up in analyst predictions. You will miss the forest for the tree-growth projections. The difference between Apple having sold 12 million iPads versus 13 million iPads is, at worst, the difference between great and really great. In fact, I’d say it’s more like the difference between really great and really really great.

Think about how Tim Cook put iPad sales in context during Apple’s conference call yesterday:

“Just two years after we shipped the initial iPad, we’ve sold 67 million. To put that in some context, it took us 24 years to sell that many Macs, and five years for that many iPods, and over three years for that many iPhones, and we were extremely happy with the trajectory on all of those products.”

The original iPhone shipped at the end of June 2007. Two years (and a few weeks) later, Apple announced its Q3 2009 results. They sold 5.2 million iPhones that quarter. The very next quarter, Apple sold 7.4 million iPhones — at the time, the highest quarterly sales number for the iPhone to date.¹

Two years after shipping the original iPad, Apple just sold 11.9 million iPads. And that’s after selling 15.4 million iPads during the previous (holiday) quarter. Comparing those numbers to the iPhone circa 2009 is far more interesting and instructive than comparing them to the 13-million-unit analyst consensus.

Now, if a well-informed analyst truly had reason to believe Apple would sell 13 million iPads during the quarter and they only sold 12, it is fair to say that’s “disappointing”, insofar as 12 is less than 13. And perhaps, over the next year or two, Madrigal’s “nagging sense” will prove correct, and iPad sales growth will taper off.

But this 11.9 million unit quarter is anything but a sign of such tapering. And, according to Tim Cook (again, from yesterday’s conference call):

“But I’d also point out that the new iPad was supply constrained last quarter for the full three weeks or so that it was shipping and is actually still constrained.”

Which means Apple sold new iPads as fast as they could make them. If you believe this 11.9 million unit sale number deserves to be called “disappointing”, you should be disappointed only by Apple’s inability to manufacture them faster. Other than that, there simply is no bad news for Apple in these results.

In short, the evidence to date suggests not that the iPad is another iPhone-esque success for Apple, but that the iPad is an even greater success than the iPhone.