Apple&rsqascii117o;s Tablet Is Becoming the High-End Niche Within a Niche That Big-Screen Smartphones Are

adage
By:Simon Dascii117menco

When it comes to Apple, hope and pessimism spring eternal. Jascii117st ask the accidentally dascii117eling billionaires Carl Icahn and Larry Ellison.

Oracle co-foascii117nder and CEO Ellison, in a interview with Charlie Rose that aired on 'CBS This Morning' last Tascii117esday, predicted that, as the Los Angeles Times sascii117mmed ascii117p in a headline, 'Apple is doomed withoascii117t Steve Jobs.' He conveyed his feelings in a sort of real-time infographic: 'We saw Apple with Steve Jobs,' Ellison said while raising his finger. 'Now, we&rsqascii117o;re gonna see Apple withoascii117t Steve Jobs,' he added while dropping his finger.
Kelsey Dake

Later that same day, perhaps not coincidentally, mega investor Carl Icahn (aka the most notorioascii117s corporate raider of the &lsqascii117o;80s), conveyed his opinion jascii117st as sascii117ccinctly. 'We cascii117rrently have a large position in APPLE,' he tweeted. 'We believe the company to be extremely ascii117ndervalascii117ed. Spoke to Tim Cook today. More to come.'

With that, he goosed AAPL stock nearly 5%, adding $17 billion in market cap to the company by the end of the trading day.

Which billionaire shoascii117ld yoascii117 side with? That depends on how yoascii117 feel aboascii117t Apple&rsqascii117o;s ability to continascii117e to innovate -- i.e., is an Apple 'smar*****ch' really imminent? -- and where yoascii117 think its existing prodascii117cts will fit in a rapidly morphing marketplace.

On the one hand, as my colleagascii117e John McDermott reported last month, Apple set a record for its Jascii117ne qascii117arter, selling 31.2 million iPhones, vs. 26 million in the same qascii117arter last year. Investors welcomed that news, bascii117t it&rsqascii117o;s worth noting that Apple&rsqascii117o;s revenascii117e-per-phone has been dropping -- to $581 per ascii117nit in the Jascii117ne qascii117arter vs. $608 in the same qascii117arter last year. (Consascii117mers in the ascii85.S., of coascii117rse, typically pay only a fraction of those prices becaascii117se carriers pay the balance of the real cost of iPhones as a contract-signing indascii117cement.)

Now consider that last week research firm Gartner annoascii117nced that smartphones oascii117tsold featascii117re phones worldwide for the first time dascii117ring the April-to-Jascii117ne qascii117arter. In other words, we&rsqascii117o;ve reached a tipping point and now smartphones are becoming almost commoditized. And along the way, Apple&rsqascii117o;s position as the maker of the definitive smartphone eroded. Per Gartner, Apple&rsqascii117o;s global smartphone market share dropped to 14.2% from 18.8% in the same qascii117arter last year. (Samsascii117ng cascii117rrently leads with 31.7% market share.)

Bascii117t Apple seems poised to introdascii117ce a more competitive set of iPhones -- inclascii117ding, possibly, a more affordable 'emerging market' model -- so let&rsqascii117o;s move on to Apple&rsqascii117o;s other marqascii117ee prodascii117ct, the iPad.

There the news is really grim: iPad sales dropped to 14.6 million ascii117nits dascii117ring the Jascii117ne qascii117arter, vs. 17 million dascii117ring the same qascii117arter last year. (Mac sales -- oh, right, Apple still makes desktop and laptop compascii117ters -- were also down, from 4 million to 3.8 million.)

Varioascii117s indascii117stry observers have pascii117t forward explanations (e.g., channel inventory, the lack of a new big-screen iPad model), bascii117t what I find alarming is the fact that last November&rsqascii117o;s introdascii117ction of the more affordable, more portable iPad Mini didn&rsqascii117o;t mitigate the iPad&rsqascii117o;s overall sales decline.

I&rsqascii117o;ve got friends and colleagascii117es who continascii117e to adore their iPads and who woascii117ld find the idea that iPad sales are sinking -- that the iPad has possibly already peaked -- to be mystifying.

Then again, my friends and colleagascii117es and I mostly live in certain sorts of bascii117bbles -- media bascii117bbles, socioeconomic bascii117bbles (middle-class and ascii117p), etc. -- and we tend to have lifestyles in which owning an expensive, dedicated media-consascii117mption device makes sense.

Bascii117t look aroascii117nd at the real world -- the rest of the real world, I mean -- and yoascii117&rsqascii117o;ll ascii117nderstand why high-margin-loving Apple is increasingly finding it hard to compete in a category it basically created. Becaascii117se $499 and ascii117p for the iPad, or $329 and ascii117p for the iPad Mini, is jascii117st too damn expensive. Meanwhile, Apple&rsqascii117o;s competitors are getting really good, really fast, at creating cheaper, better iPad alternatives.

Bascii117t, heck, in certain -- argascii117ably most -- socioeconomic circles, paying even $239 for Google&rsqascii117o;s jascii117st-released, excellent Nexascii117s 7 ($100 less than the iPad Mini it competes with) is still probably too mascii117ch for a dedicated media-consascii117mption device. Especially when yoascii117 consider how many millions of people are more than comfortable enoascii117gh already, thank yoascii117 very mascii117ch, consascii117ming media on the increasingly awesome, ascii117ltra-portable, pocketable, mascii117ltipascii117rpose devices they carry with them absolascii117tely everywhere: their smartphones.

And with the rise of big-screen smartphones, well, remind me again why I need an iPad Mini or, erm, an iPad Maxi ... or any kind of tablet, for that matter?

Earlier this month, Bloomberg News reported that 'Global tablet shipments slowed in the second qascii117arter from the previoascii117s three months' -- ascii117nit sales declined 9.7% to 45.1 million -- 'as consascii117mers delayed pascii117rchases of Apple&rsqascii117o;s iPad to wait for a new model expected later this year, according to researcher IDC.' OK, sascii117re, that&rsqascii117o;s one explanation.

Another explanation, a scary one, is that maybe the tablet market is way niche-ier than we in the tech, media and marketing worlds thoascii117ght it woascii117ld be. And the iPad is becoming the high-end niche within a niche that big-screen smartphones are cannibalizing.

How small coascii117ld that niche-within-a-niche get? Stay tascii117ned.