iPad sales collapse? iPad mini leads to changes in buying behavior

The iPad mini has changed the tablet market

In light of speculation that the sales of the full-size Apple iPad have "collapsed," an informal and non-scientific poll of "iPad enterprises" and consultants shows instead some changing buying behaviors.

Enterprise buyers are a somewhat fixed market: If you have 500 or 5,000 sales staff due to receive an iPad, once they get them, that market is "saturated." In other cases, some of these sub-markets were considering iPhones instead of iPads, but now they're turning to the iPad mini. Some higher-education IT staff expect next fall's incoming students will bring a large crop of iPad minis because of the lower price compared to the 9.7-inch tablet.

[ HANDS-ON TEST: Tablet Wars: Microsoft Surface RT vs. Apple iPad

BACKGROUND: iPocalypse now? iPad sales "collapse" and the Web freaks ]

The "iPocalypse" meme of collapsing iPad sales was sparked because of the way a group of tech bloggers, news sites and industry analysts interpreted a market research firm's one-month estimated drop in OEM 9.7 display shipments. [For full details, see "iPocalypse now? iPad sales 'collapse' and the Web freaks"]

The data is from David Hsieh, an analyst with NPD's DisplaySearch unit who recently blogged some excerpts from a new report -- the "Monthly TFT LCD Shipment Database" -- on the company's website. Keep in mind that the full-size iPad is the only popular tablet using the 9.7-inch diagonal display.

The blog post's key passage -- the one being seized upon by tech sites -- is this: "Shipments of 9.7" tablet PC panels collapsed, falling from 7.4 to 1.3M, while 7"and 7.9"panel shipments grew rapidly, from 12 to 14M. ... The January panel shipment data may be an indicator for 2013, starting with Apple's product mix shift."

DisplaySearch's data, which tracks shipments among various suppliers, not sales of finished final products to consumers, could only be explained by a collapse in consumer demand, according to some commenters.

"Apple's supply chain is typically a well-oiled machine, and they're very good at minimizing working capital requirements by avoiding any channel stuffing issues," argues Sameer Singh, an independent analyst and founder of the Tech-Thoughts mobile industry blog. "The only possible cause of sudden drop in display shipments (even for a month) is an inventory build-up at some point in the supply chain."

"This is why I believe that a drop in sell-through can be the only realistic explanation for the inventory build-up," he says. "The only other explanation is a change in screen size and that doesn't seem likely."

Apple sold 22.9 million iPads in calendar Q4 2012, he says, "of which anywhere between 7-10 million were iPad Minis (according to most estimates). This means that 9.7" iPad shipments in Q4 2012 fell somewhere between 13-16 million units."

That estimated range compares with the year-ago Q4 total of 15.4 million, and the immediately prior quarter, leading up to the iPad mini launch, of 14 million.

"Considering the fact that this was [the holiday-driven] Q4, we should have seen a spike in purchases (at least more than Q2), with iPad Mini being sales being additive (i.e., [we should have seen] ~27-29 million total shipments), but instead the full-size iPad's growth [rate] basically crashed (the market). ... Overall, the iPad Mini did expand the market, but because of this cannibalization effect, it wasn't as much as most analysts expected."

"That was a growth crash," Singh says. "The shipment collapse is forward looking, i.e. Q1, which seems likely based on Q4 [shipment] figures and NPD's [January OEM display shipment] data."

Not everyone agrees. Data collected by Yankee Group in successive 2012 consumer surveys show continued strong demand for 9-inch to 10-inch tablets, with a single-digit drop in late 2012, according to Carl Howe, vice president, research and data sciences, at Yankee Group, a Boston IT research and analysis firm.

The survey covers 16,000 consumers and is done in four "waves" during the year: February, April, August and November, allowing the research firm to compare periods.

"Demand for 9-10 inch tablet sizes dropped by about 7.5% to 62 percent in Wave 4, from 70 percent in Wave 3," Howe says. "Similarly, interest in 5-7 inch tablets grew from 18.5% to 25% [in the same period], a growth of almost 7 points. Some of that is normal statistical variation wave to wave, but some of it is because Apple legitimized the [smaller] form factor too."

"iPads are by far and away the best-selling tablets: 49 percent of all tablet owners own an iPad, and a similar number of consumers intend to buy one," Howe says. "Apple currently dominates tablets and we see no sign that consumer sentiment there is changing. Even if it were, there are millions of consumers making these decisions, and those numbers change slowly at best."

By its nature, anecdotal data from a handful of various enterprises with iPad deployments can neither refute nor confirm either of these analyses. Some enterprises are scaling back iPad purchases; others are expanding, or thinking about expanding, iPad mini purchases.

"My clients buy iPads in full size and mini, perhaps trending more toward the mini these days," says Benjamin Levy, principal with Solutions Consulting, a Los Angeles consulting practice specializing in deploying Apple products for business customers. "I'm not sure if that's pent-up demand for a smaller iPad or a trend for a smaller device."

"My guess is that the research and interpretation you're seeing is a result of Apple's unwillingness to break out sales figures between models of iPad," Levy continues. "However, saying that the [full-size] iPad market has collapsed seems ludicrously uninformed."

Purchases of the 9.7-inch iPad, now numbering about 3,000, at The Ottawa Hospital "have leveled off or decreased as we have largely covered our target population [mainly doctors] for full size iPad," says Dale Potter, the hospital's senior vice president strategy and transformation.

Currently the hospital is pilot testing 200-300 iPad minis, which could grow to a total of 2,000 by year-end for nurses and related health professionals. For both groups, the decisive element is the screen size. The doctors emphatically insist on the larger screen, the nurses equally emphatically on the smaller (they had been considering iPhones or iPod touches).

Abilene Christian University in Texas was a very early "mass" adopter of iPhones and iPod touches for incoming freshman, reorganizing and redesigning classroom curricula to take advantage of always-connected mobile touch computers. The iPad is increasingly part of this mix. Between August and December 2012, iPads of both sizes were 12% of the registered devices on ACU's Wi-Fi network.

"In looking at the monthly totals for January 2013 and February 2013, iPads represented 7.2% of the devices registered in those two months," says Arthur Brant, ACU's director, networking service. "I don't necessarily find this drop surprising, since most of our students register devices at the beginning of the fall semester."

"Beginning this fall a significant number of ACU classes will be requiring a tablet device -- an iPad," he says. "With this decision, I suspect we'll see a fair percentage of students bringing iPad minis because of cost."

Apple's current fiscal Q2 concludes at the end of March, with an earnings report due in April. That will provide some of the data needed to assess the trajectory of iPad sales.

John Cox covers wireless networking and mobile computing for Network World. Twitter: http://twitter.com/johnwcoxnwwEmail: john_cox@nww.com

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