Why Apple’s iPad Sales for Q2 Were so Poor

| Editorial

Apple’s iPad sales for the Q2 were disappointing, but that may reflect a customer savvy not seen before in the Apple world. When I say disappointing, I’m referring to the professional consensus for iPad sales of about 6.26 million.

Previously, my own estimate was that Apple would report sales of 9+ million iPads for the last quarter. That was based on Christmas momentum and the popularity of the iPad 1. I used Apple’s own aggressive goal of selling 40 millon iPads in 2011. That’s 3.33 million per month.

However, it appears that Apple customers, right after Christmas, became very savvy about Apple’s plans for the iPad 2. Tim Cook reminded everyone in the Q2 Earnings Report that invitations to the iPad 2 event went out in late February, and every celebrity, every writer, every website, every blogger was in ecstasy thinking about the iPad 2 because, for one reason or another, they had passed on the original iPad.

In fact, for Apple’s sales of all iPads for the quarter to have been only 4.69 million suggests that iPad 1 sales fell off a sharp cliff in January, February and especially early March. I didn’t expect that because, in my experience, most Apple customers go about their business blissfully unaware of Apple’s plans for new products. But not those wanting the iPad 2. Not this product, and not this time.

That awareness, in contrast to the Macintosh world, suggests that iPad customers are much more keenly aware of Apple’s product plans. It reflects a new consumer connection to Apple, and that’s got to be good.

I expect, in the coming quarters, iPad sales will bounce back to previous levels. Tim Cook reported that he is confident that, in the short term, supply can meet demand. And that’s quite a statement, considering the iPad has seen, as he said, “the mother of all backlogs.”

Comments

pats

I think your analysis misses on a key issue which is crucial to profitability.  How do you turn the old product off and start the new.  A wafer takes about 6-10 weeks to make it from start to finish so there is little room in the middle of a qtr.  If we assume Apple hoped to ramp in Feb for a Mar release, We have the audio chip supplier, announcing they had a ramping problem.  So let’s assume the ramp did not go as planned.  The iPad was a disappointment against a qtr which had zero iPad sales.  We still have little clue on the demand side of iPad 2 but based on historical adoption for technology and current sellouts, demand remains healthy and we won’t have real Indicators until next qtr.

Lancashire-Witch

Bryan: iPad in 59 countries by end of quarter. iPad channel inventory declined by 400,000 units. Every iPad made was sold. In other words, Apple can’t meet demand.

This comment from Bryan in the Earnings Report coverage indicates that the iPad was supply constrained. You can’t sell off an empty wagon! That could explain the disappointing sales numbers.

Also, Apple is not the first company in the world to grapple with the operational issues associated with phasing out old models and introducing new ones. If the changeover from iPad 1 to 2 contributed to poor supply then they need to look at their planning and inventory management processes.

LarryV

If that’s the case, then we should expect iPhone 4 sales to plummet as iPhone 5 is coming in just 2 months. And since 50% of Apple is now iPhone sales, look for Apple’s stock price to plummet. So thanks for the tip.

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