The iPad Turnaround Is Coming
by Jean-Louis Gassée
On the one hand, we have iPad plummeting sales, dropping 50% in three years. On the other, we have Apple’s professed high optimism, without much proof besides some new — and clever — ads, and the recent discreet release of evolutionary and slightly less expensive hardware. Is that all?
The iPad is a strange animal, confounding explanations and expectations.
Trouble started right away at the January 2010 iPad launch. Steve Jobs, known for his affirmative, ringing positioning statements, hemmed and hawed when inaugurating the iPad [as usual, edits and emphasis mine]:
“[iPad] has to find its place between the iPhone and the Mac”
At the time, it sounded like a stream-of-consciousness ventilation that belied a hesitant inner monologue. Seven years later, we see how prophetic it was. We all know what a PC is for, and we “get” smartphones…but we’re still debating what an iPad wants to be. Is it a PC replacement or just a media consumption device? Is it for knowledge workers, or couch surfers, or artists, or students… That we ask these questions points to an abundance of riches, but our culture needs certainty, it demands sharp taxonomies.
In the middle of the heated identity debate, iPad sales took off. This time, the facile “meteoric” cliché was fully justified: iPad sales grew three times faster than the iPhone, flew past Mac numbers in 2013, and then reached their zenith and began to fall, as shown in Apple’s 10-K (annual) filing:
As Mac sales grew from $21.5B to $24B in 2014 — a healthy 12% uptick — iPad revenue decreased from $32B to $30.3B (- 5%).
As Statista shows, the downward trend continued unabated, with a perplexing 50% decrease from the 2013 Holiday quarter to the same 2016 period. In the tech world, products don't recover from such tailspin:
In the middle of this unpleasantness, two interesting things happened.
First, after mocking Microsoft’s tablet-PC hybrid as a toaster-fridge, Tim Cook changed his tune. Ignoring Steve Jobs’ diss: “If you see a stylus, they blew it”, Apple introduced its own hybrid in the iPad Pro, complete with “Smart” Keyboard and Pencil.
More important, Cook gave witness to his faith in the iPad’s future:
“The iPad is the clearest expression of our vision of the future of personal computing.”
After a 50% drop in sales — Nokia and Blackberry proportions — critics might think Apple’s CEO was as delusional as Mssrs. Olli-Pekka Kallasvuo and Lazaridis/Balsillie were when their companies nosedived. To start with, I don’t hear Cook speaking in tongues. More seriously, Apple’s commander-in-chief has long been known to be a thoughtful speaker: We can take him both literally and seriously.
This brings us to the meaning of recent events.
Without fanfare, new iPads were announced last week. There were no changes to the Pro devices, but the standard line was simplified: No more Air, just plain iPads, with a slightly lower $329 starting price (or $309 at the Education store).
This was preceded by a new advertising campaign. Neatly and cleverly done (a matter of opinion of course), the newer iPad ads have a point of view that conjures Apple’s attitude during the early-80’s PC wars:
Last week, Apple updated all of its operating systems, from macOS to watchOS. That there were no glitches is remarkable enough, but what makes the seamless conversion really remarkable is that the iOS file system was converted to the more modern Apple File System a.k.a. APFS.
Changing the foundation under a building inhabited by hundreds of millions of people isn’t a small undertaking, and Apple pulled it off without incident. iPhone and iPad users didn’t lose their data; instead, they got a file system that improves storage management, encryption, reliability, and performance. (Full disclosure, I have a personal connection with Dominic Giampaolo, one of the APFS architects. I’d love to do a piece on the topic of APFS and file systems in general, but I’m not sure I can do justice in digestible words.)
There’s more to this than an indisputable technical advantage. As hoped for in this space, it’s part of a shift that partially explains Cook’s fervor for the iPad: iOS, not macOS, will be the software engine of Apple’s future. Mac fans, I’m one of them, might disagree with Apple’s strategy, but here it is in plain view.
This leads us to an easy guess for future iPad Pros. We’re likely to see linear hardware and software improvements (keyboard, screen, stylus, more independent windows…), plus others we can’t think of immersed, as we often are, in derivative thought. All will make the Pros more pro: Powerful enough of take business away from the Mac (and Windows PCs). I like my MacBook, but can see an iPad Pro on my lap and desk in a not-too-distant future.
Apple’s World Wide Developer Conference is just a couple months away; new hardware will emerge in the Fall. Perhaps I ought to stick to predicting the past, but there too many signs pointing to more muscular iPads taking business away from conventional PCs.
The iPad turnaround is coming.
For perspective: 2016 (calendar as opposed to fiscal ending in September) iPad revenue was $19B. This would rank the iPad “company” as 149th on the Fortune 500 list, between Cummins diesel engines and Altria cigarettes.
— JLG@mondaynote.com
