A painful blow to the tablet market, Morgan Stanley slashes growth estimates

A painful blow to the tablet market, Morgan Stanley slashes growth estimates

Summary: It's not surprising. The signs have been there for a while — not least Apple's dismal iPad figures for the second quarter.

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TOPICS: Tablets, Mobility
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(Image: CNET/CBS Interactive)

It's not quite a death sentence for the tablet market, but it's glory days may be over — if the latest research proves true.

Morgan Stanley analyst Katy Huberty said in a research note on Sunday that the investment giant is lowing its tablet growth forecast by more than half — from 26 percent to 12 percent — for 2014.

The reason? Mostly due to the "lack of new, differentiated products," she wrote.

Although the slowdown in tablet growth might help the ailing PC market, its global PC market estimates remain unchanged, down by 5 percent this year and the year after.

The iPad, back in 2010 when it was first released, didn't just spearhead the design of the slate-like device as we know today. It was the first modern-day tablet that single-handedly carved out the entire tablet market. But four years later, iPads missed Wall Street estimates for the second-quarter by a long shot.

Apple was expected to sell 19.2 million iPads, down from 19.4 million on the year-ago quarter, according to average analyst estimates. But Apple pulled through with just 16.35 million iPads sold during the three-month period. iPhones helped to offset any revenue decline during the quarter thanks to shooting off the estimates scale.

Apple chief executive Tim Cook explained on the follow-up investors call that it was more a blip than anything too drastic.

He said that there were two factors for missing estimates. In the same quarter a year prior, Apple increased iPad channel inventory, whereas in this quarter it was reduced. And secondly, Apple ended the first quarter, its main holiday season, with a backlog of iPad mini, which was subsequently shipped during the second quarter just ended.

Whether or not that's an accurate portrayal of Apple's own business, many are looking at Apple's iPad business as an indicator of the overall health of the tablet market.

And it's not just Morgan Stanley saying it.

Research firm IDC said earlier this month growth in tablet market is declining, with the iPad slowly slipping away from its prime position at the top of the market share table.

According to its latest data, over the 12-month period the tablet market grew by 3.9 percent, down from previous expectations.

IDC called the slowdown "challenging." 

Apple saw a 16.1 percent decline year-over-year for the first quarter, dropping from 19.5 million shipments to 16.4 million shipments. That represents a 32.5 percent of the overall share, down from 40.2 percent in the first-quarter of 2013.

At this rate, Samsung could become the market leader in the tablet space — albeit with a larger range of devices than Apple — by the middle of next year. And that's even taking into account the slowdown of the tablet market.

Topics: Tablets, Mobility

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41 comments
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  • Most tablets aren't that useful...

    The reality is that most tablets (particularly iPads & Androids) are just big phones. If your phone serves most of your computing needs then tablets are kind of limited-purpose devices.

    This is where Microsoft has an opportunity, since they're presenting tablets that "do more" or are "productivity devices"... which makes them a better value. Whether they can sell that vision still remains to be seen. My guess is that it will be most appealing to the enterprise.
    cybersaurusrex
    • Not true...

      Tablets are useful, when used for their intended purpose.

      You're not going to replace a tablet with a 4 or 5 inch phone screen, either. Too many applications require more real estate than a phone can provide. For example, using a spreadsheet on a phone is nightmarish, as are database fields.

      Unless you are an extremely light-user, your phone is NEVER going to serve all of your computing needs.
      ribzilla
      • umm

        6.3" phones are as big as ereader screens!
        slickjim
      • What is the intended purpose of a tablet?

        A tablet is just a form factor, not something that should impose limitations on the capabilities of the device.

        Tablet, phone, laptop, etc... they are all computers.
        Emacho
        • Intended purpose is not that same as actual use.

          The OEM's want you to believe that the Tablet will provide for all of your computing needs. That is of course ludicrous. What the table is good for is comms; both email, phone and VOIP and it is good for entertainment; ebooks, movies, tv, mediocre games and just plain ole browsing.

          What the tablet sucks at though is replacing either a laptop or desktop. But that's not it's intended use.

          The really sad thing is that Intel is wasting shareholder value by paying the OEM's to buy their cheap chips. This has cost Intel to date $6 BILLION and is why their stock is down below $30 instead of over $40. t is also why Warren Buffet dumped Intel and why Intel is one of the 10 top shorted stocks in the NASDAQ.

          Intel can not compete in this market. Their FABs are too expensive.
          RAV555
    • I don't see the "do more" thing really taking off

      Nobody wants an 8" tablet with all kinds of wires and serial cables falling off of it, so it will never be used as a PC, even if it technically can be one.

      I think we're seeing the tablet give way to larger screened phones. Computers fill our productivity needs already. Phones can tackle most of our mobility needs. Is there any place left in the space between there for tablets? Seems like that's become less important.
      Mac_PC_FenceSitter
      • WP8 -> RT

        As Microsoft moves to merge WP8 with RT, what you might see is a large phablet that can also work as a desktop computer as well.
        Rann Xeroxx
        • ???

          Tablet for MS Office????? Tablest are cool toys for entertainement and comms. They are not for productive workflows.

          Desktops workstations are for power hungry discrete gpu's and storage, laptops are usefull if you have another keyboard, tablest are cool toys. The consumer has gone to tablets and maybe they are realising that a laptop or desktop is still necessary.

          Basically is something that you buy becasue it's cool and you try to find a use to justify the expense.

          Don't deride the cool factor either I think Mobile Observatory is very cool and worth the price of the tablet by itself. Also Skype on the tablet is cool too.

          But I would never do work on my tablet it's not productive. I would never take it into the field on a survey assignment. That's a good way to break it.
          RAV555
      • Funny....

        ...that's precisely WHY I'm considering ordering an 8" tablet now - for the ability to use it as an alternative desktop (via a USB docking station) when the need requires it.
        brian@...
      • and large screen phones can't be docked to replace a desktop or whatever?

        I think people are getting to caught up in the size of the device and forget that underneath all of the marketing there is a computer. A computer that has quickly become as powerful, hardware wise, as portable computers from just a few years ago.

        Considering most of those computers already had enough processing power to meet most average users needs, there it little reason to continue treating phones and tablets as if they can't do more.

        Almost the entire history of computing is based on that. Devices that do more.
        Emacho
      • I do

        I use my ATIV SmartPC 500 as a tablet on the move, then dock it in the office for multi-screen desktop work. It has the added benefit, that if I need to, I can still do desktop work on the tablet on the move, it isn't as convinient as using it docked with mouse and keyboard, but it works well enough.
        wright_is
  • PLEASE REMOVE THIS SPAM

    Truly irritating to see this kind of stuff - we need a junk mail folder for threads to get rid of these dumb, disingenuous ads.
    larsonjs
  • Good!

    Does this mean Jim can finally stop trying to shoehorn the iPad into every situation?

    tablets had one real selling point... Battery Life! Now that phones are getting bigger and Laptops have 8+ hours of battery life, there's very little that a tablet does better than a decent PC or Mac.

    I use my MacBook Air for long battery life and my Desktop PC for gaming. The tablets only see use when reading in bed and that might not be worth the money with a TV in the bedroom and an eReader.
    slickjim
    • of course, software doesn't matter at all, for you

      whereas "laptops" run $h1ttows, tablets run better s/w- android, ios or just about anything. If you spilled spaghetti on the tablet, that would look better than windows.
      GrabBoyd
      • OMG!

        I read your comment and uninstalled windows right away. Now I am writing this code by using assembly language that writes raw HTML data directly to the network card.
        I am now pure , man. I am so anti-establishment. I am so cool my fingers are freezing.
        paul2011
        • What??

          Are you smoking something?
          slickjim
        • No Smoking

          Just exaggerating to make a point. Aka sarcastic, cynical, acerbic, etc.
          PreachJohn
  • This is completely normal...

    The lifecycle of many new technologies includes a "honeymoon" phase, during which consumers purchase the product because they feel pressured into doing so.

    Tablets certainly have their place in both the business and consumer realm; but too many people tried to "square peg" the tablet into a round hole of needs. Not long after the iPad was introduced, people began to write the desktop PC's obituary. While tablets certainly had an effect on the desktop, they certainly aren't ever going to replace it. You simply cannot perform many tasks on an 8 or 10 inch screen.

    And so, we've come to the point where consumers have purchased their tablets, learned their strengths and weaknesses, and adjusted their expectations. Tablet-fever has subsided, and we'll begin to see sales level-off and some players in the tablet field disappear.
    ribzilla
  • Problems are SURFACE-ing!

    Microsoft has all but crushed Apple and Android in this space. I ordered ALL employees here to buy their own Surface 2 Pro tablets and mandated they be brought to ALL meetings. Failure to bring a Surface 2 Pro to a meeting is cause for immediate dismissal. We usually spend the first few minutes of the meeting clicking the keyboard on and off and dancing on the conference room table. I love corporate America!
    Mike Cox
    • re:

      Off your meds, are you?
      Sir Name