Apple’s results conference call on Monday revealed another record-breaking quarter with record-breaking iPhone and Mac sales, but iPad sales were down for the third straight quarter, and down Q2Q from a a year ago. Steve Jobs famously predicted that PCs were like trucks, tablets were like cars, and most people really only needed a car. Pros, he said, would keep using trucks for the heavy lifting, but the PC era was supposed to be over.
Microsoft can’t get anywhere with the Surface, and judging by app sales and web usage stats, the vast majority of el cheapo Android tablets go unused and unloved.
So is the tablet era over before it ever began?
Hard to say. iPad still generates huge profits, back to third behind Mac sales, with tens of millions sold each year. And the company is now taking a radical (for Apple) approach to the tablet market.
Previously, Apple sold only the new model of the full-size iPad, plus last year’s model at a discount and at a single memory tier. They then added the iPad mini to the lineup. A year later when the new iPad mini was introduced, the old model continued to sell, again at a discount and again at a single memory tier. That reduced shopping confusion for consumers and helped Apple keep their SKU count low. (“Steve hates SKUs,” I once joked.) Under the Old Regime, tablet prices started at $299 for last year’s iPad mini with minimal memory, and topped out at $929 for a maxed-out 128GB iPad Air.
Now things have changed. A lot.
The two-year-old original iPad mini is still for sale, now with two memory tiers to choose from, with the starting price reduced even further. Last year’s mini (with Retina Display) is also still on sale, at the usual $100 discount, and also with two memory tiers. The new iPad mini is at the usual price, and with the usual three memory tiers — but the top two tiers offer twice as much memory as before.
The iPad Air has gotten a similar treatment. Last year’s model? Two tiers, $100 off. This year’s model? Three tiers, with the top two tiers offering twice as much memory as before.
That’s a lot more choice than Apple usually offers in its consumer range.
The buy-in price for an iPad is now just $249 for a 16GB iPad mini. That’s $50 less than Apple has ever charged to let you into their ecosystem. But the top-end price for a new-generation 128GB iPad Air has dropped from $929 to $829. The product range has expanded from four two five, but the pricing scheme has both dropped and compressed. So prices are down, value is up, and the product range has increased. As a shareholder, I’m also pleased that Apple has managed to do all that in a way which should protect its enviable profit margins.
Is it enough to boost sales again, or at least forestall further declines?
That’s the Big Unanswerable, but Apple’s new strategy shows they are nowhere close to giving up on the product category they redefined from Microsoft’s original vision of “Windows-with-a-stylus” to “the touch computer for anybody.”