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Apple's iPad turns 5: Where does it go from here?
The iconic tablet was a phenomenon out of the gate, but with sales slowing, the iPad finds itself at a crossroads on the fifth anniversary of its original launch.
When Steve Jobs showed off what he called the "truly magical and revolutionary" iPad in 2010, no one guessed just how quickly it would take off.
The 3-year-old iPhone may have been a surefire hit at the time, but the iPad was a wild card. Analysts' predictions for first-year sales ranged wildly between 1.1 million and 7 million units, according toAsymco.
Apple sold 14.8 million iPads in that first year.
It's hard to overstate the impact the iPad had on the consumer-electronics industry. Much like the iPhone reimagined the cell phone, the iPad redefined the tablet -- previously clunky, bulky laptoplike devices often built for specific work purposes -- and essentially created a new product category that heavy hitters such as Samsung and Microsoft are still chasing. The iPad, which was the last new product introduced by Jobs, quickly became a household name and further stretched Apple's dominance in the mobile arena.
"It took a tiny, tiny market and turned it into a mainstream product," said Jan Dawson, an analyst at Jackdaw Research. "That's what Apple does."
The numbers are staggering. Apple has sold more than 250 million iPads, making it the fastest-selling product in the company's history. There are more than 725,000 apps designed specifically to run on the tablet.
But the iPad, which first hit the market five years ago Friday, is at a crossroads. Shipments have slumped despite Apple's best efforts to entice consumers with thinner and smaller models. The question that originally dogged the first iPad -- why buy one? -- has arisen again with smartphones getting larger andlaptops getting lighter and more compact.
Apple CEO Tim Cook calls the weakness a "speed bump," and has said he believes the long-term opportunities remain strong. Apple is rumored to be working on a larger-screen "iPad Pro" meant for business customers.
But critics question whether even Apple can reverse the slowing growth in the broader market, which isexpected to grow only 2.1 percent this year, according to IDC. That's a far cry from the 294 percent jump in the market from 2010 to 2011.
"We're not going to see the growth rates we've seen in the market over the last five years," said IDC analyst Jean Philippe Bouchard, adding that he expects a slow year for Apple.
In its last quarterly report, Apple said shipments of the iPad dropped 18 percent, to 21.4 million. Since peaking in fiscal 2013's holiday period, sales have fallen year-over-year in every subsequent quarter.
Still, there's no question that the iPad is a force -- the $9 billion in sales it tallied in the last quarter outgrossed McDonald's total fourth-quarter revenue. Given those robust sales, it's easy to forget that many questioned why people would want an iPad.
From joke to juggernaut
There was no shortage of critics when Apple unveiled the iPad in January 2010. Some ridiculed its name, which could have easily been applied to a feminine hygiene product -- "iTampon" was a popular topic on Twitter after the announcement. Others called it an oversize iPhone. Many questioned its usefulness.
"The biggest problem with the device is coming up with bulletproof reasons to buy one," CNET editor Donald Bell said in his review of the original iPad.
Consumers didn't care. The iPad's launch drew the kind of crowd that shows up for an iPhone debut. Apple said it sold 300,000 iPads on the first day, and sales would more than double the most optimistic estimates that year. Within 60 days, Apple sold 2 million iPads.
It didn't take long for the iPad to make its cultural mark. Designer Oscar de la Renta showed off a designer iPad clutch at a fashion show. President Barack Obama was even asked to virtually autograph an iPad. Time magazine called it the "Gadget of the Year." Shortly after the iPad 2debuted in early 2011, it was the centerpiece of an episode of "Modern Family."
"It's like Steve Jobs and God got together to say, 'We love you, Phil,'" one of the characters said in the show.
The device's success was so overwhelming that "iPad" quickly became synonymous with "tablet." Just as Kleenex is used for common facial tissues, consumers will ask for an iPad even if they mean another tablet.
Tablet market gets crowded, loses luster
The iPad was a boon to Apple in the early days. In the first year after its launch, the iPad controlled 77 percent of the tablet market.
That dominance couldn't last forever. By 2014, the iPad's share shrank to just 28 percent, according to IDC.
What happened? The market expanded, which is why the amount of revenue that Apple generates now is significantly higher than it was in year one. But the competition gained ground on the iPad when it came to unit sales.
Apple essentially had the run of the tablet market until Amazon came along with the Kindle Fire in November 2011. Amazon's core innovation: a price tag that was dramatically lower, at $199 (the iPad started at $499). If the iPad taught us what a tablet was supposed to look like, the Kindle Fire reset our expectations for how much we had to pay for one.
Google gave a boost to affordability with its Nexus 7, which was also priced at $199 but was packed with decent specifications and the latest version of the Android operating system.
Nowadays, Android tablets have proliferated, from Samsung's high-end Galaxy Tab S line to Verizon-branded tablets given away with certain smartphone purchases. Today, more than two out of every three tablets runs Android, according to researcher Gartner. Nearly 400 million Android tablets have shipped, according to IDC.
But there's a clear difference between bargain tablets and the premium tier, which is where Apple continues to dominate.
"Apple is doing really well in the part of the market where it sits," Dawson said.
That's not to say the iPad doesn't face questions about its future. Apple tried to expand its potential market with the smaller and lower-cost iPad Mini in October 2013. At the same time, it tried to inject some energy by slimming down the original tablet, creating the iPad Air. Last year, with the iPad Air 2, it added a fingerprint sensor, made the body even more svelte and added a gold variant.
The improvements so far haven't worked: iPad shipments continue to fall.
"What made the iPad unique doesn't quite set it apart as much as it used to," Dawson said.
A future in business
So what has Cook so optimistic about the iPad's long-term prospects? One thing might be Apple's deal with International Business Machines to work together on industry-specific applications.
The pact could drive big businesses to adopt iPads as a formal workplace tool.
"I think we're really going to change the way people work," Cook said in an earnings conference call in January. "I'm really excited about the apps that are coming out and how fast the partnership is getting up and running."
The iPad is already a fixture in many offices. CNN commentators were caught using Microsoft Surface tablets as kickstands for their iPadsduring the last round of election coverage in November. The British government said last month that all members of its parliament would be given an iPad Air 2.
Cook's not the only one who thinks there's an opportunity in the workplace. Apple archrivalSamsung has launched a program of its own to sell mobile devices to business users and work with them on apps and security.
And there's a reason rumors persist that Apple will build a larger "iPad Pro" better suited for workplace use. The tactic worked for Microsoft -- its supersized Surface Pro 3 helped turn its fledgling tablet family into a billion-dollar business.
Apple has also made a push to get more iPads in schools. In 2012, it launched iBooks Textbooks and iTunes U, which gave users access to free educational content. Last year, there were more than 750,000 iPads in kindergarten to 12th grade schools in Texas alone.
Apple's not alone in angling to get into schools. Google has been pushing its Chromebook laptops as an affordable education tool. In 2014 -- just three years after they were introduced -- Chromebooks accounted for about one third of the education market, with a 29.9 percent share. Windows still had the lead with 39 percent, while Apple had 32 percent, according to IDC.
The core consumer, meanwhile, could eventually come back and upgrade to a new tablet. Perhaps now that they've spent their limited funds on the iPhone 6 or 6 Plus, which came on the market late last year, they could be eyeing an iPad upgrade for the next time around.
Bouchard said he believes the period between device upgrades is around three-and-a-half years, longer than the upgrade cycle for a new smartphone, which is closer to 18 months to two years. Apple has the benefit of a huge base of customers.
