Monday, April 25, 2011

iPad Sales Slipping

Surprisingly and certainly unexpectedly, Apple’s iPad sales are slipping. They’re slipping enough that iSuppli has gone ahead and readjusted the predicted numbers of iPads that it believed Apple would sell in 2011. That’s a pretty quick decision. Is it really that bad?

At an earnings call on Wednesday, April 20 Apple reported that it had sold 4.69 million iPads in the first quarter. That seems like a ton, doesn’t it? Well, in the fourth quarter of 2010, Apple sold more than 7.33 million iPads, although you have to consider that this number includes the holiday sales.

Originally, iSuppli was predicting that Apple would sell 43.7 million iPad units in 2011, but due to the decline, AppleInsider is saying that they have dropped that forecast to 39.7 million. Before the earnings call, there were a variety of different iPad sale predictions ranging from 45 to 60 million, but I think that those numbers will be dropping very soon.

So why is it that the sales aren't meeting the expectations? One of the biggest issues seems to be that Apple simply cannot keep up with the incredible demand for the device. Tim Cook, Apple’s chief operating officer, said that Apple is dealing with “the mother of all backlogs.”

"I wish that we could have made a lot more iPad 2s because there were a lot of people waiting for them," Cook added.

The new and improved version of the device was released on March 11 in the United States, and it has been incredibly popular. It was reported that Apple sold almost a half a million iPad 2s during the first week that it was in stores, although there was a five week wait period for the device. Reports also stated that they sold out overseas just as quickly.

iSuppli said that some of the slowdown surrounding the iPad 2 was due to the quality of the touch screen LCD panels and the production shortages of the advanced speakers that went into the device. It simply was more difficult to crank out these higher quality parts. There are also rumors that Apple ran into a few manufacturing glitches that slowed down the process as well.

“When we looked at the manufacturing numbers, they must have run into some manufacturing issues, some quality issues in terms of turning those products around, because we didn't see the volume manufactured that we expected to see in the first quarter," said Rhoda Alexander, the director of monitor research at iSuppli.

Some might question whether or not the 8.9-magnitude earthquake that devastated Japan could have caused some production delays as well, but Apple claims that this had no effect on the manufacturing of the device. It was rumored that Apple was being forced to pay extra to ensure smooth shipping of the iPad 2 parts that they received from their Japanese suppliers, but Cook claimed that the disastrous event did not have any kind of impact on supply or cost for Apple.

Although iSuppli has decreased its prediction of sales in 2011, the 2012 predictions have gone up. Previously, it was forecasting that 61.6 million units would be sold in 2012, but they have now increased that number to 62.6 million.

It’s interesting that although there has been a decline in iPad sales, Apple is reporting record earnings. They recently reported profits of $5.99 billion, which is a 95 percent increase over the same time period last year.

It doesn't matter if iPad sales do continue to slip; I think that it is safe to say that Apple will somehow make it through.

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