Apple's iPad sales: Time for 'pricing stimulus'?

Apple's iPad sales: Time for 'pricing stimulus'?

Summary: Amazon's Kindle Fire and talk of iPad upgrades just months away may be hampering Apple's tablet sales. Price cuts could change that equation in a hurry though, say analysts.

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The consternation over Apple's iPad sales in the December quarter is reaching a fever pitch, but at this juncture it's unclear whether growth is merely pausing or something more serious.

Worries about iPad sales in the December quarter (fiscal first quarter) are actually leading some analysts to call for "some pricing stimulus" on Black Friday and beyond.

To wit:

  • Business Insider noted that Goldman Sachs analyst Bill Shope rang the alarm bells about iPad sales. Shope said that it's prudent to assume the iPad is seeing demand challenges. The Goldman analyst also argued that the iPad is overdue for a price cut. Overall, the iPhone is going to drive Apple's results.
  • Barclays Capital analyst Ben Reitzes said in a research note that iPad sales are also worrisome. Reitzes noted that Apple's fiscal fourth quarter iPad sales of 11.1 million was weaker than the 11.7 million expected by analysts. Apple channel inventory was up 1.45 million units to 2.5 million. As for the first quarter, Reitzes said "we currently estimate iPad unit sales of 13.9 million for the December quarter, which may prove optimistic by 1-2 million units."
  • Other analysts said that Apple will grow sequential iPad sales, but a lot rides on Black Friday sales.

Here are some thoughts on what's going on with Apple iPad sales.

Later today; Great Debate: Are $200 tablets a game changer?

The Amazon Kindle Fire effect. The Fire will be landing on doorsteps today and the $199 device could be disruptive. As I noted, the integration is done well and the Fire is a nice entertainment device. If you're watching specs, however, the Fire is lacking. It's quite possible that consumers are watching the word of mouth with the Fire before deciding on a $499 and up iPad. A Fire that's good enough can poach sales from Apple. Also see: Amazon's Kindle Fire: Snappy consumption, impulse purchase device | Kindle Fire vs. iPad heats up for holiday shoppers (survey)

Upgrade rumors for the iPad. It's likely that a new iPad will land in March of 2012. Anyone who can wait will. Reitzes had an interesting take on Apple's upgrade plans---think iPad 2S. He said:

Our research still points toward Apple continuing to innovate in the iPad category with an iPad 3 launching in the March timeframe with an HD screen, Siri integration and a faster processor. It is possible that Apple keeps the iPad 2 in the category as well. First, we expect a possible “iPad 2S” that includes a faster processor and Siri integration. Second, we believe that Apple will keep the current 16GB version of the iPad 2 in the line-up next year, using it as a lower-priced option to compete with new entrants. Indications in the supply chain around C1Q production patterns back these views, even though 4Q momentum has waned.

Meanwhile, an iPad 3 could be waiting to support LTE in the fall of 2012. In all cases, consumers know that it may not make sense to buy an iPad 2 right now.

It's time for "pricing stimulus," said Reitzes. Apple may simply need to cut the price on the entry level iPad. If $200 is the new benchmark for tablets and the Fire takes off---it just might---then Apple's iPad will look pricey. Frankly, it's amazing that Apple has been able to hold iPad pricing this long as rivals repeatedly stumble. Apple will keep the high-end and Amazon will take the low end. Can Apple really afford to cede the low end of the market to others? I'd argue that Apple will have to dabble in the low end just like it does with the iPhone.

Apple price cuts---if they are coming---would land in just a few days.

Add it up and Apple's iPad sales growth should be weaker than expected. Consumers are just being rational and trying to make the best buying decision they can. The big caveat is a lot can happen between now and Dec. 31 on the iPad sales front.

Topics: Apple, Enterprise Software, iPad, Mobility

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143 comments
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  • 2S?

    Could be especially if Apple cannot get the proposed "Retina" level display for the next gen iPad and has to fall back on a lower but improved resolution display.
    rhonin
    • It's post-tablet era now

      Don't expect people to pour so much money into an overpriced toy very long. Not in this economy. The European #s are going down. So will that of US. Just wait.
      LBiege
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @LBiege The only reason I can think of to call it a 'toy' is to not have one. Do you actually own an iPad? I find it incredibly useful in all aspects of life and really isn't a 'toy'. It integrates into life and business very well. I'm using it far more than my laptop at this point, especially at home.
        Roger H
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @LBiege please when you have kids working at Radio Shack and not paying anything at home for their bills cause mommy and daddy will take care of it, you are still going to see Apple sales keep its track because wasteful spending is not a problem for kids now a days, hey the learned it from their parents.
        jarzola@...
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @LBiege I agree. The notion that upgrades coming in a few months are what is causing folks to hold back is nonsense. Most of us just don't have $500 to throw around in these times.
        Techboy_z
      • Someone seems to have forgotten Apple's history...

        @LBiege: ... of demonstrating double-digit growth during this last recession.
        Vulpinemac
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        "an overpriced toy"-LBiege

        Your prejudice is showing. That "overpriced toy" provided more sales and more productivity in 9 months than all the tablets combined had in the previous 9 years.

        If you want to stick your head in the sand and pretend that the tablet revolution isn't coming, that's fine with me. But the rest of the world is going to move on without you.
        Falkirk
      • US is already down

        @LBiege, I have friends in the US and by what they describe I don't know if thing could get much worse for them. Even the family I have in the US are struggling but at the same time they have long ways to fall as they are rich. My aunt/uncle there complain that they have to cut back or they could run out of saving in their retirement.
        voska1
      • PC sales are down

        I guess nobody wants to buy those toys, either...
        ScorpioBlue
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @Falkirk: Shows you are a "fanboi". When you say "provided more sales and more productivity in 9 months than all the tablets combined had in the previous 9 years" where is the information to back up this claim? Maybe for you but not others. Last I remember, I don't think tablets existed 9 years ago. Biased...
        Gisabun
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        actually tablets have existed since 1994 with Windows for pen computing. Microsoft relaunched their tablet pc push in 2001. So tablets have been around for ages.
        alamfour
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @LBiege I just finished recording my staff Christmas greetings for a nationally broadcast Christmas show on my "toy." Last week, I did the final PDF proofing of my new book on my "toy."
        psion@...
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @psion

        "I just finished recording my staff Christmas greetings for a nationally broadcast Christmas show on my "toy."

        oh you did? Is that video or audio? You expect us to believe your tool of choice for broadcast quality audio/video production is - the iPad? And it is in your opinion the best choice of tool for this task because.... ?

        "Last week, I did the final PDF proofing of my new book on my "toy."

        Again... the only question is WHY? A regular laptop/desktop is far better suited to this task for many reasons. You insistence on using an iPad for something like this only shows up your willingness to suffer unnecessarily, nothing more....

        Yes, it is a toy. Get over it.
        12312332123
    • RE: Apple's iPad sales: Time for 'pricing stimulus'?

      @rhonin No it won't. The Kindle Fire is not in the same class as an iPad. Apple will pay this as much attention as they've paid to all the other table entries, which is to say no attention at all.
      His_Shadow
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @His_Shadow we have not even started talking about win 8 wait till it comes on the scene with phone 7.5 soon to be upgraded to 8 and total integration with desktop laptop and tablets app integration to the level no one ever imagined. where will ipad and iphones hide?
        augustus_rome
  • Market saturation?

    Is it also not possible, that the iPad is reaching saturation point among those that are interested in such technology?

    The general opinion among the people I know, both inside and outside the tech industry, is "why would I want one?" Those that see a use for an iPad have bought one, the rest can't see a use case for a tablet, even at $199.

    The bleeding edge techers and the poncy boy showoffs have all bought their Fondleslab, now Apple (and others) are having to reach beyond those that will just pay up to have the latest and greatest, to those that will buy something they need... And the iPad isn't a product that the majority of people "need".
    wright_is
    • RE: Apple's iPad sales: Time for 'pricing stimulus'?

      @wright_is

      I agree, until a tablet comes out with more extended PC capabilities like a Win8 device, the market doesn't have room for much growth beyond the gadget geeks and the fringe group of people who have $500 to blow on a consumption tablet.

      A netbook/laptop replacement is what the next generation of tablets need to be. Then, you will see a long growth of sales. So far, Microsoft seems to be the only that understands that.
      spaulagain2
      • If this is what they think, they are hosed

        Really? Why is that? You think people are dying for a device with no keyboard so they can do RealWork(tm)? Buy a clue: laptops are just fine for doing RealWork. They're cheap, too. Far cheaper than any tablet capable of running today's large desktop Windows apps could ever be.

        The "Windows 8 tablet" is a fantasy. In the consumer market the low-cost Amazon-type offerings will kill anything capable of running, say, Access. In the corporate market, the cheaper laptop will prevail because companies aren't going to pay a premium to save a pound and a quarter-inch.
        Robert Hahn
      • Maybe so but remember ...

        @spaulagain ... that netbooks are available today for $350 and Windows 7 notebooks for $500 and people are still flocking to tablets because of the form-factor. I think that tablets will remain "consumption" devices but, like netbooks, they are just too small to be good content-creation devices. Whether or not Microsoft OEMs can succeed with a Win8-driven tablet remains to be seen.
        M Wagner
      • RE: Apple's iPad sales: Time for 'pricing stimulus'?

        @spaulagain [i]"So far, [b]Microsoft[/b] seems to be the only that [b]understands[/b] that. "[/i]
        Do those two words ever belong in the same sentence? ;-)
        non-biased