Apple (AAPL) is expected to release its next generation of thinner, faster iPads later today, but analysts and investors aren’t very excited about the new models.
That’s because the tablets don’t have any earth-shattering new features that would cause enough owners of prior models to upgrade. And after the rapid growth of the early year, there are many fewer households that don’t own a tablet but still plan to purchase one.
Apple is holding a press event at 1 p.m. Eastern Time to unveil its new products. The company apparently slipped up on Wednesday and disclosed pictures of an upgraded iPad mini and iPad Air in a manual for using the devices posted online. Apple also may announce new Macintosh computers and new details about its Apple Pay service.
The new iPads will surely have faster processors and better screens, but are unlikely to spur a significant uptick in sales, analysts said.
After blasting onto the scene with amazing growth for a few years, Apple’s tablet growth has slowed amid competition from cheaper competitors and buyers who seem increasingly reluctant to upgrade from “good enough” older models. Sales of iPads slipped 13% to 29.6 million in the first half of this year compared to the same period in 2013.
Over 60% of U.S. households with broadband Internet service already own a tablet and 70% of such households with income over $100,000 already own both a tablet and a smartphone, according to a survey by Parks Associates. Apple’s share of tablet-owning U.S. households dropped to 37% this year from 46% two years ago.
Apple’s iPad sales slide has been deeper than the overall tablet market, where sales are still growing. Samsung (005930.KS) and Amazon (AMZN) tablets running versions of Google’s (GOOGL) Android software are the next leading sellers in the United States, but worldwide some of the toughest competition is coming from much cheaper models from Lenovo (0992.HK) and other Asian manufacturers.
The new iPhone 6 Plus also could hurt iPad sales by cannibalizing some sales of the iPad mini. Still, that’s a good trade-off for Apple, since the 5.5-inch screen phone carries a much higher price tag and profit than the entry-level iPad.
Meanwhile, sales of all tablets, including iPads, are expected to increase only 11% worldwide this year compared to a 55% jump last year, according to Gartner.
Corporations and other large institutions are perhaps the only remaining under-exploited niche that could aid iPad sales, notes Parks Associates analyst Tejas Mehta. Apple struck a deal with IBM (IBM) earlier this year to try and bolster enterprise sales.
“There is a lot of potential growth there,” says Mehta. “The key is to extend the functionality of the iPad, so it’s not just a device that is used for (Internet) access and entertainment.”
New applications designed by IBM for specific industries like finance and health care could help. So might the long-rumored iPad with a laptop-sized screen. Reports of a 12.9-inch iPad have surfaced from time to time over the past year, but the phantom device remains just that.
The once-promising iPad accounted for only 16% of Apple’s revenue last quarter, down from 17% in the first quarter. That’s left the company increasingly dependent on iPhone sales, which at least so far, continue to grow strongly.
Maybe when Tim Cook comes on stage today, he’ll have one more big surprise for corporate iPad fans – one that could get iPad sales booming again.