Why the collapse of the iPad matters less to Apple than you think

We know that sales of iPads and tablets are in a funk. In an excellent analysis by Neil Cybart at his Above Avalon blog, he concludes that it’s worse than we think.

I think his analysis of the numbers and the reason for the startling drop are spot on. It’s his proposed remedy that I think is off base. While Cybart argues for a change in Apple’s iPad strategy, I think the drop in iPad sales isn’t the disaster for Apple that it might appear to be.

First, let’s start with Cybart’s number crunching.

In the most recent quarter, reported last month, Apple said it sold 10.9 million iPads compared to 13.3 million in the year-ago quarter. Bad, by any measure.

Cybart, however, says the seasonal ups and downs of iPad sales make it hard to see the real decline. He calculates the trailing 12 month average of sales (see chart on his post). This shows a steady decline in growth starting in early 2012 that became flat in early 2014 before turning increasingly negative.

“This smoothing effect highlights that the iPad and tablet have been on the decline for years and things continue to worsen with the overall tablet market hitting negative territory for the first time,” Cybart writes. “All momentum has been lost.”

The reasons, according to Cybart, mirror almost exactly the situation in my home. We have an iPad 2, which represent 20.5 percent of iPads currently in use, according to his analysis. I would estimate that while we have various apps and some games on it, 95 percent of our iPad use is watching Netflix or YouTube.

As such, there’s not much incentive to rush out and upgrade. We’ll use this until the day it dies. Cybart believes that’s bad news for Apple.

“A product category with a use case summed up by Netflix watching is quite problematic since it is that much harder to sell a differentiated product, leading to a rush to the bottom in terms of pricing, quality, and features,” Cybart writes.

Where I disagree with Cybart’s view of this problem is that it’s actually a problem. Because he views it as a problem, he calls for a major rethinking by Apple.

“It is time to fundamentally address the problems with multi-tech tablet computing,” he writes. “The answer is to introduce a new product subcategory at the high-end of the tablet market.”

This view comes from the basic assumption that for a product to be successful, more of it has to be sold each quarter and each year. Naturally, this is how an investor or former Wall Street analyst like Cybart might view the world.

But I think Apple (smartly) thinks more broadly and long-term than that, which has been one of the keys to its success. Rather than worrying about propping up a declining product, like the iPod, it follows the users (and leads them in some cases) to where they are happier and more satisfied.

The real question Apple should be asking is: What do users want?

In many cases, the answer is turning out to be…a Mac. In the most recent quarter, Apple reported that it sold 4.8 million Macs, led by growth in MacBooks, a figure that represents a 9 percent year-over-year increase.

Cybart wants Apple to develop a new iPad that stands out from the MacBook and iPhone. But why should Apple care if I’m buying an iPad or a MacBook?

For many of the enterprise and education customers Apple is chasing, the MacBook is likely a better solution than the iPad. No need to over-analyze this. The reason is simple: The iPad doesn’t have a keyboard.

No matter how many clever productivity and creativity apps people build, at some point you need to input things by typing. And typing on the iPad’s virtual keyboard (or any tablet’s) remains clunky and slow and tiring.

You can always type faster on a real keyboard, which is why many schools are shifting to things like Chromebooks over iPads. And if you’re taking notes in a meeting, it’s going to be stressful pecking away on the iPad. Yes, you can get a bluetooth keyboard for the iPad, but that’s basically turning it into a half-assed laptop, so what’s really the point?

The good news for Apple is that, thanks to cloud computing, it seems like the world is coming back around to the Mac. As more services operate over the Internet and through the browser, the operating system matters less and less.

I think this is why we’re seeing things like IBM’s recent announcement that it’s starting a new service to help enterprise customers integrate Macs into the office. It seems silly to try to contort the iPad into a form that makes it a better substitute for a superior product you already sell. If a business wants Mac, sell them a Mac.

If anything, as the prices for the MacBook Air continue to fall, I would expect to see more and more schools give these a look. It’s probably a better future for Apple’s education efforts than the iPad.

If there is one shift I’m looking to see, it’s whether Apple will eventually bring touchscreens to Macs. No matter how many times I remind my kids that my 7-year-old MacBook doesn’t have a touchscreen, they still instinctively put their fingers all over the screen expecting things to happen.

None of this is meant to suggest Apple should just give up on the iPad. I certainly don’t expect the iPad to follow the iPod into near-oblivion. Even if quarterly sales are declining at the moment, the universe of iPad users is still likely expanding. Apple chief executive Tim Cook noted back in April that, of the iPads sold, 40 percent in the U.S. and 70 percent in China went to first-time buyers.

“As we look at the usage statistics on iPad, it remains unbelievably great,” Cook said on the most recent earnings call. “I mean, the next closest usage of the next competitor, we’re six times greater. And so these are extraordinary numbers. It’s not like people have forgotten iPad or anything. It’s a fantastic product.”

I haven’t bought a new iPad in years. But we still use it every day. Apple might have a bigger problem if people were slowly putting iPads in the drawers and forgetting about them. But they’re not. And so eventually, they’re likely to get new ones, even if that upgrade cycle is looking more like MacBooks than iPhones.

Despite quarterly or 12-month cycles for iPads that are weak and getting weaker, it’s easy to look around the world and see that more people in more countries are using more Apple products every day. That’s driving higher App Store sales and creating openings for new products like the Apple Watch (we’ll see whether it ends up in drawers or not) and the soon-to-be revamped Apple TV (I have the old one and would buy a new one the day it goes on sale).

It’s hard sometimes to look past a bad data point to see the bigger picture. But if any company has the discipline and culture to do that, it’s Apple.

No need to panic about the iPad. Just keep calm and carry on selling Macs.