Must-know: Why Apple forged a partnership with IBM (Part 5 of 5)
Apple’s iPad sales continue to decline
Apple (AAPL) recently announced its fiscal third quarter earnings in which all its businesses, except the iPad, showed strong growth. iPad unit sales declined by 9% in the last quarter over the same quarter a year ago. Apple’s management cited channel inventory changes and softness in the overall tablet market as reasons for the decline.
According to a report from IDC and as the chart below shows, the tablet market is showing sequential quarter-over-quarter decline in the last two quarters.
A couple of factors are contributing to this decline in the tablet market. One factor is the increasing popularity of smartphones with bigger screen sizes, which makes smaller-sized tablets almost redundant. Another factor is that tablets have a higher shelf life compared to smartphones. Consumers are forced to replace their smartphones frequently due to contracts with telecommunications providers, especially in developed markets like the U.S. But this isn’t the case with tablets.
Partnership with IBM should help Apple sell more iPads in enterprises
Apple recently entered into a partnership with IBM (IBM), allowing IBM to analyze the data on Apple’s devices. This analysis can then be used to improve the security, productivity, and device management features of Apple’s devices for enterprises. For example, IBM’s big data and analytics technology could analyze information from apps such as HomeKit and HealthKit on Apple devices.
Average selling price declines for iPhone, a negative for Apple
Although Apple sold 13% more iPhones in the June quarter compared to the June quarter a year ago, its average selling price declined from $581 in its fiscal third quarter of 2013 to $561 in its fiscal third quarter of 2014. The main reason for this decline was that Apple has been promoting the older and cheaper versions of iPhone such as the iPhone 4S to increase its sales. The iPhone 4S has gained popularity in emerging markets such as India and China.
Apple is known to be a premium player. But frequent declines in average selling price don’t bode well for Apple’s iPhone business. A decline in average selling price is also negative for exchange-traded funds (or ETFs) like the iShares Dow Jones U.S. Technology ETF (IYW), the Technology Select Sector SPDR ETF (XLK), and the PowerShares QQQ Trust (QQQ) , which have high exposure to Apple.
Browse this series on Market Realist: