The iPad is going to suffer the same fate the Mac suffered a generation ago

October 29, 2013
Quarterly iPad sales based on Apple earnings reports. Apple's fiscal year begins October 1. (Timothy B. Lee / Washington Post)
Quarterly iPad sales based on Apple earnings reports. Apple's fiscal year begins October 1. (Timothy B. Lee / Washington Post)

Apple's latest financial results came out on Monday, and as usual the Cupertino firm made an astonishing amount of money: $7.5 billion. Yet this quarter's results contained at least one disappointing sign for Apple's fans and shareholders.

Apple sold 14.1 million iPads in its fiscal fourth quarter, which runs from July to September. It's the first time Apple has ever had iPad sales fall for three quarters in a row. Even more ominous for Apple, this quarter's sales are only slightly higher than the 14 million iPads Apple sold during the corresponding quarter last year.

Those disappointing results come at a time when sales of Android tablets have been soaring. And it's the latest sign that the iPad is succumbing to the same problems that previously befell the iPhone and the Mac. Apple's vertically-integrated product design philosophy and premium pricing helps the firm pioneer new product categories. But as the technology matures, Apple inevitably cedes the market share crown to another firm with a relatively open platform. In the 1990s, that company was Microsoft with its Windows OS. Today, it's Google with Android.

To be fair to Apple, this quarter's anemic results make demand for iPads look worse than it actually is. Some customers undoubtedly delayed iPad purchases in anticipation of this month's new product announcements. Also, the quarter that just ended is traditionally a slow one for the consumer electronics business. Next quarter, Apple will not only be hawking shiny new iPads, it will be doing so during the lucrative holiday season. So we should see a big spike in iPad sales in the last three months of the year.

The problem is that Android has not been standing still. One analytics firm estimated that 34.6 million Android tablets were sold from April to June of 2013, almost double sales of 18.5 million Android tablets a year earlier and more than double Apple's own sales of 14.6 million iPads during the same period. Apple may comfortably beat last year's holiday record of 22 million iPads in the coming holiday season, but that won't be nearly enough to erase Android's market share gains over the last year.

This is new territory for the iPad but familiar territory for Apple. For its first two years on the market the iPad utterly dominated its product category. But iOS gave up the tablet lead to Android earlier this year and it's unlikely to reclaim it any time soon.

That mirrors the experience of the iPhone, which pioneered the multitouch smartphone category but eventually ceded 80 percent of the market to Android handsets. More ominously for Apple, it mirrors the experience of the original Macintosh. Apple created the first commercially-successful computer with a graphical user interface, only to see Microsoft Windows capture more than 90 percent of the PC market.

All three cases reflect the same basic market dynamic. Apple's vertically integrated business model makes the firm ideally suited to create new product categories before anyone else. But technical wizardry and a keen design sense can only keep the competition at bay for so long. Early adopters are willing to pay a premium for the latest and greatest, but many ordinary consumers simply want to spend as little money as they can for a product that meets their needs. Sooner or later, competitors figure out how to reach rough feature parity with Apple's platform without the Apple markup.

The market for tablets is still growing rapidly, so Apple's relative decline is hardly an emergency for Cupertino. Apple could carve out an extremely profitable niche selling luxury tablets and smartphones to the most discriminating customers, just as it did in the PC business a generation ago. Indeed, thanks to the high margins on the most sophisticated devices, the iPad may continue being the most profitable tablet for a long time. But the Cupertino company's vertically-integrated business model and premium prices all but guarantee the company won't dominate the tablet market any more than it has dominated the smartphone or PC markets. In a few years, most people will be using Android tablets just as they now use Android smart phones and Windows PCs.

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