Cook confronts analysts on iPad sales

Cook confronts analysts on iPad sales

No sooner did Apple announce its second quarter 2014 financial results than financial analysts and reporters called it a miss, because iPad sales were lower than analysts' expectations. In his preamble during the conference call to discuss those results, Apple CEO Tim Cook took a moment to address the discrepancy.

"iPad sales came in at the high end of our estimates," Cook emphasized, uncharacteristically taking issue with analysts' projections.

Cook suggested that analysts had a skewed perspective on Apple's prospective sales for the quarter because of two factors: Apple greatly increased iPad channel inventory for the same quarter a year ago. Separately, Apple exited the December quarter with a large backlog of orders for the iPad mini with Retina display, while it worked down that inventory over the quarter.

Cook's explanation of channel inventory was expanded upon by Luca Maestri, Apple's VP of finance and corporate controller. Maestri explained that iPad sales declined only 3 percent year-over-year in sell-through: the number of iPads in new customers' hands. That's a slightly less harsh measure than the 16 percent decline in sell-in, or the number of iPads actually in distribution.

Cook also noted that about two thirds of Apple's iPad customers have never owned an iPad before — a strong indication that plenty of new customers still want the iPad.

The iPad remains the fastest growing product in Apple's history, Cook said later. The company has sold over 210 million iPads to date.

"We've come a long way very quickly," he said.

Asked if Microsoft Office for iPad would positively affect iPad sales, Cook said, "Office I believe does help. I believe it's very unclear to say how much."

Cook suggested that if Microsoft had released Office for iPad earlier, it would have done even better for Microsoft, owing to changing behavior of iPad customers and the availability of Microsoft alternatives, such as Apple's own iWork apps, which now ship free with the iPad.

"I wholeheartedly welcome Microsoft to the App Store. Our customers are clearly responding in a good way," said Cook.

Peter Cohen

Managing Editor of iMore, Mac and gaming specialist and all-around technologist. Follow him on Twitter @flargh

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There are 19 comments. Add yours.

teepeeayy says:

Doomed! Apple is doomed! Abandon hope, ye who enter here.

Antron says:

"Cook also noted that about two thirds of Apple's iPad customers have never owned an iPad before — a strong indication that plenty of new customers still want the iPad." Yes Tim we still want iPads indeed :)

JAL Payen says:

iPad 6 ==> at least 4GB RAM or bust.

theromz says:

iPad 6 ===> at least 12 cores or bust.

angermeans says:

RAM is the last component I demand out of a tablet (especially one that runs iOS). I can positively guarantee that the next iPad will not have 4GB of RAM. Maybe 2, but like I said who cares? The way iOS has been designed and polished over now seven years makes it an entirely different beast then a desktop/laptop PC.

Me personally, I can't wait to see what Apple does with the A8 processor. The A6 and especially A7 was packed with so much innovation I couldn't believe the power we have in our iPhones and iPads. Nearly six months later and the competition still hasn't caught up. Think about it for a second. The A7 runs faster then processors with double the cores, 3-4 times the clock speed, and android devices have 2-4 times the amount of RAM. The A7 is a beast and on top of that is extremely power efficient. Can you imagine how great the battery life will be when they have more room in a 5" device and newer A8 processor?

JAL Payen says:

ANGERMEAN,

Running Pages and Numbers simultaneously on an iPad 3 (A5X, quad-core, 1GB RAM) makes the device very slow. How does the iPad Air handle that (also 1 GB RAM)? Why only 2GB RAM for the iPad 6 considering that MacBook Airs have at least 4GB RAM?

Sure, I should get a low end Mac, but I can't afford it.

I suppose THERMOZ and KKAMOE are righteously throwing mud at me with their comments. Understand I am not so tech savvy, please.

kkamoe says:

iPad 6 pro ==> at least 15" screen or bust

theromz says:

Still something to be said about a decrease YoY sales, I would suspect this is to do with customers not needing to upgrade the iPad as quickly as an iPhone, some of it due to it being brought out right and not on a typical 2 year contract.

Galley says:

That's it exactly. iPads can easily last 3-4 years.

heretiq says:

You nailed it Galley! My iPad 1 was handed down after purchasing the iPad 2 3G the day it was released in 2011, and the iPad 1 is still working perfectly well. My iPad 2 quickly became my co-primary computing device (along with my MBP) and stayed that way for 3 years until the light weight, retina graphics, silky smooth responsiveness, LTE speeds, and amazing battery life enticed me to *think* about something other than my iPad 2. I ultimately replaced my iPad 2 with the iPad Air LTE. The iPad 2 was handed down and is still going strong. Like my Macs, every iPad I have owned was handed down and continued to work well and provide value long after they were displaced.

LandRovers says:

True, iPad 2 are still going strong, probably one of the reasons apple was still selling them new until recently.

crazygonzo says:

But why not release an iPad that those two thirds of people would want instead of continuing to sell a device with the same functionality for the past three years (even if it was improved/polished) ? Why allow the decline in the first place instead of pumping up excitement and taking advantage of the obvious tablet interest ? Is this really a smart choice on their part or are they stupid/afraid/reluctant as was the case with the Mini model ?

kkamoe says:

The reason is because why fix something that isn't broken. Ya numbers are declining in iPad sells but let me know what tablet is doing better than the iPad? It's never gonna stop and users that have iPads will upgrade and people that don't want one. Apple has nothing to worry about.

crazygonzo says:

Sales are dropping, market share is getting obliterated by Android and "it's not broken ?". With that approach I'm surprised that they even bother to sell a single Mac.

kkamoe says:

When you say obliterated you mean the hundreds of different options that are out there and iPad still has a big chunk of internet traffic. It isn't broken, just like what Cook said to the analysts, "Apple does things right not first." Trust me iPad will continue to be strong and Apple has nothing to worry about.

richard451 says:

aka. they stuffed the channel. that should put a sock in the apple fans who think shipped == sold for apple.

JeremieJones12 says:

In my own personal experience I purchased both the 5s and then checked daily for the release of the mini w/retina. After having both for around a month I realized that I had literally only picked up the mini twice and 1 of those times was to set it up. This is no knock on the mini at all, this is more a testament to the power of the 5s. I sold the mini and haven't looked back, although the iPad Air is very tempting. My experience could be just a one off or maybe some other people shared my sentiment. I am eagerly awaiting the 4.7 inch iPhone and maybe would even consider the rumored phablet iPhone, if it indeed is released. But I do find myself no longer in the iPad market and would probably look to a laptop as my secondary device.

Saturn1217 says:

I would be one of those new iPad owners :-) typing this on one right now and i am very pleased. I just hope apple continues to improve especially in software. The iPad has amazing potential as a mobile productivity device and I just hope Apple keeps improving on this. File management would be amazing as would active stylus support! (And no i don't think iPads need to be like android tablets they just need to keep improving)

Gus2259 says:

Since when did Wall Street become the one to establish sales goals for companies, particularly the mix of products?