Apple iPad Sales Disappoint Analysts, but Picture Could Change

Apple reported 4.19 million iPads last quarter. That disappointed some analysts, but Apple's evolving store channels could increase sales.

Apple CEO Steve Jobs may have appeared unexpectedly on his company's Oct. 18 earnings call to trumpet a $20 billion quarter, but Wall Street analysts seemed somewhat disappointed by sales and margins for the iPad.

For the fiscal 2010 fourth quarter, Apple reported sales of 4.19 million iPads-a significant increase from the 3.27 million sold during the tablet PC's inaugural quarter.

Nonetheless, that figure seemed below par to some analysts, who have been predicting enormous sales for the iPad into 2011. Gross margin pressure on iPads was also stronger than expected, likely helping dip Apple's stock price Oct. 19.

Sales of the iPad were "disappointing," Lloyd Walmsley, an analyst with Primary Global Research, wrote in an Oct. 18 e-mail to eWEEK, "but supply constraint is likely the main culprit." However, "our supply checks indicate they can do 6.5-7 million iPads in [the fourth quarter] given more supply and wider distribution (Verizon, AT&T, Target, Best Buy in more stores)."

Apple has recently begun an aggressive iPad push into retail stores aside from its own. In addition, Apple may announce a deal for a Verizon iPhone, which would increase the smartphone's already red-hot profile. For the fiscal 2010 fourth quarter, Apple reported iPhone sales of 14.1 million units, easily trumping sales of 3.89 million Macs and 9.05 million iPods.

Walmsley wrote that the "iPhone [is] doing incredibly well, with units of 14.1 million up 91 percent year-over-year and way ahead of expectations of 11 million." He added: "This is before expanding to Verizon in the U.S. and Vodafone in Germany and Tata and Reliance in India, all of which we expect soon."

Worldwide media tablet sales will reach 19.4 million units in 2010, according to an Oct. 15 research note from Gartner. A significant portion of that growth will be driven by iPad sales. Gartner also suggested that tablet sales are having a negative impact on sales of other mobile devices.

"The all-in-one nature of media tablets will result in the cannibalization of other consumer electronics devices such as e-readers, gaming devices and media players," Gartner analyst Carolina Milanesi wrote in an Oct. 15 statement accompanying the research note. "Mini-notebooks will suffer from the strongest cannibalization threat as media tablet average selling prices (ASPs) drop below $300 over the next two years."

Despite analyst disappointment, Apple CEO Steve Jobs insisted during the company earnings call that the iPad was, in effect, a Godzilla to rival devices' Tokyo.

"I have a hard time imagining what those [competing] strategies are. Tablets with far less functionality are having a hard time matching us in price," Jobs told financial analysts. "Flash hasn't presented a problem at all ... as you know, most of the video on the Web is available in HTML5."

He added: "We think we have a very good product here that's hard to match, and we're not done."

Rival devices poised to hit the market, such as the Samsung Galaxy Tab and Research In Motion's PlayBook, are expected to include features such as dual-cameras and video conferencing unavailable in the current version of the iPad. However, analysts and pundits expect to refresh the iPad with new features within the next few months.