Why the iPhone 6 is bad news for the iPad

Apple’s latest numbers are pretty routine for this time of the year. Not a lot to see here folks, other than the fact that while its core product (the iPhone) is doing just fine, the iPad isn’t selling as much as it should

With 35.2 million iPhones sold in the last three months and $US7.7 billion in profit, Apple will be understandably pleased with the impact the iPhone is having in the developing markets, especially China.

However, sinking iPad sales are a blemish and while Apple chief executive Tim Cook may be unperturbed by the trend, the launch of the iPhone 6 is going to put the iPad under even greater pressure.

iPad sales for the last three months fell 9 per cent  in unit terms to 13.3 million units, well short of analysts’ expectations of 14.4 million units. It’s also the second straight quarter that sales have declined and this graph from Quartz  illustrates the trend.

The threat is magnified when you take into account that the iPhone 6 launch is going to be a grandstand affair. Apple’s suppliers are reportedly manufacturing between 70 million and 80 million of its two forthcoming large-screen iPhones by the end of the year. According to the Wall Street Journal, this is the largest initial production run of iPhones.

Smartphones with bigger screens, something Apple has steered clear of until now, are already seen as a threat to the tablet PC. The launch of iPhone 6 is going to increase the pressure.

So does the iPad run the risk of following the footsteps of the iPod?  

Unlikely. But it’s going to be a bumpy ride for the iPad as the upgrade cycle for the device seemingly keeps getting longer and longer.

Telsyte research managing director Foad Fadaghi says that this extended upgrade cycle is really hurting iPad sales.

“Consumers are holding on to their iPads for a lot longer and there’s just not enough incentive for them to replace,” Fadaghi says.

“People are using them longer and there’s a thriving second-hand market as well.”

The bigger screen of the iPhone 6, according to Fadaghi, could create a perfect storm for the iPad.

With 2014 earmarked as the year the iPhone gets upgraded, consumers are likely to focus their attention on the newest device, which means upgrading their iPad isn’t going to be front and centre for them.

Apple’s recent partnership with IBM would suggest that the tech giant is across the issue. Initiating an iPad purchase cycle in the enterprise space, with IBM’s help, should help offset some of the weakness in the retail space.

Apple’s enterprise strategy has so far been largely based around the consumer market and the bring your own device (BYOD) trend, where employees bring their own iOS devices to work. However, the deal with IBM is a lot more involved. As Ovum's senior analyst, enterprise mobility & productivity, Richard Absalom points out the distribution and procurement aspect of the partnership is all about making it easier for organizations to deploy iOS devices, especially iPads, as part of a corporate-owned mobile strategy.

It will be interesting to see whether Apple chooses to provide discounts on enterprise procurement of iPads.

The iPad future hinges on one key factor: differentiation. The bigger screen pitch has run its course and for the iPad to evolve into a stronger product it needs to offer the sort of functionality that can’t be replicated on a smartphone or a phablet.