Apple’s (AAPL, Financial) devices segment regained quite a bit of traction during the first quarter as all devices except for the iPad returned positive growth figures. Apple has long been iPhone-dependent because it brings in the bulk of revenues. But the trio of iPad, Mac and Services brought in $19.94 billion during the first quarter, accounting for nearly 25% of overall revenues. If these grow steadily, they can form a huge offset for the company and balance out the iPhone dependence, especially since the potential market for high-end smartphones is becoming smaller and smaller.
iPad sales
IPad sales have been on a slow downward slide for the past five years. In 2012, Apple sold 58.3 million iPads, bringing in $30.9 billion. In 2016, Apple managed to sell only 45.59 million units, bringing segment revenues down by nearly $10 billion dollars.
The problem is not just Apple’s, it is global. The growth of smartphones, the ever-increasing screen size and enhanced power has only reduced the need for tablets. Detachable tablet-laptop hybrids have further eaten into the once-popular tablet’s turf. Global tablet sales have been on a decline since 2013, and IDC only expects the tablet market to stage a rebound in 2018.
“The decline of the worldwide tablet market is set to continue for the remainder of 2016 as year-over-year growth reaches an all-time low of -11.5% and shipments of 183.4 million units, according to forecast data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. Positive growth is set to return in 2018 and continue through 2020 with shipments reaching 194.2 million tablets as detachable tablets continue to steal share from traditional PCs.”
Mac sales
Mac sales have been a little more stable than iPad sales over the past five years. Apple managed to sell an average of 16 million to 21 million computers annually despite waning worldwide PC sales.
No one really knows when we will find the bottom of the PC market. As a high-end product, Mac has somehow managed to survive the sharp decline the PC market has recently witnessed.
One problem for Mac, however, is the rate of product innovation. Apple needs to seriously pick up the slack and give the market what it wants. CEO Tim Cook, in his usual way, glossed over it saying they were “great desktops” as part of its device roadmap.
The reason this is a big problem is that, especially at the top end of any consumer segment, you cannot have a product that has not seen innovation in nearly half a decade. Constant innovation is key. If your product is not continually evolving, you are going to keep losing potential customers.
According to Business Insider, “Apple's most vocal critics at the moment tend to be professional Mac users - those who edit videos, program and do other heavy-duty tasks on their Macs. Apple hasn't updated the model has since 2013 - leaving Pro users in a tough spot.They need the expensive 'pro' model for performance, but the only version of the machine that Apple currently offers is running 4-year-old chips.”
Although market conditions played a huge role in bringing iPad and Mac numbers down over time, Apple certainly did not help itself by being slow on the innovation curve. If it is not going to create new products, there is no excuse to not push the boundaries on the existing ones at the very least.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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