Tablet Sales Continue to Slide — What Are Investors to Do?

Yet again tablet sales took a hit in the second quarter. Global shipments plunged by 12.3% to 38.7 million, according to a report from International Data Corporation (IDC).

Tablet Sales Continue to Slide -- What Are Investors to Do?

Source: Apple

So what’s going on here? And what does the deterioration in tablet sales mean for investors?

First of all, let’s take a deeper look at the IDC report. Apple Inc. (NASDAQ:AAPL) remains the leader, with 10 million shipments in Q2. This should be no surprise since the company is the innovator in the category. Back in early 2010, AAPL launched the iPad, which was a huge hit. It certainly helped that the company leveraged the thriving ecosystem of developers and apps of the iOS platform.

Unfortunately, keeping up the momentum has been tough going. In the latest quarter, iPad shipments fell by 9.2%.

But this was actually pretty good compared to the awful performance of Samsung Electronic (OTCMKTS:SSNLF). The company suffered a 24.5% drop to 6 million units.

Yet there were still some silver linings with tablet sales. Lenovo posted a 3.1% increase and Hauwei’s shipments jumped by a hefty 71%. For the most part, it looks like the Asian market continues to provide growth opportunities.

But perhaps the biggest standout was, Inc. (NASDAQ:AMZN). The company took the No. 5 market share slot because of a blistering 1,209% surge in shipments. As should be no surprise, the AMZN low-cost strategy continues to gain traction — and there was definitely a nice boost from Prime Day.

Bottom Line on Tablet Sales

The IDC report points out some important factors impacting tablet sales. One is that the consumer segment appears to have stalled. Let’s face it, there are many smartphones that have larger form factors, such as phablets. And besides, there may not be as much incentive for people to upgrade tablets. Hey, how many must-have features do new devices really have? Well, not many.

Something else: IDC shows that there is a growth opportunity in the detachables segment. While still small, there could be a nice long-term impact on tablet sales.

A detachable is a combo of a tablet and laptop, and for the most part, these devices are attractive products for professionals, especially those who travel a lot. Because of this, IDC believes that Microsoft Corporation (NASDAQ:MSFT) could be poised for a nice boost with its Surface offering.

After all, Alphabet Inc‘s (NASDAQ:GOOG, NASDAQ:GOOGL) Android operating system has lagged with multitasking capabilities for detachables. In other words, there could be an opening for rivals.

Now, the dynamics of tablet sales is not necessarily a good gauge for picking stocks. All in all, the major players in the market have massive diversified revenue streams.

Rather, the importance of tablets is the power of synergy. For example, in the case of AMZN, the company can cross-sell its ecommerce offerings. As CEO Jeff Bezos said a few years ago: “We want to make money when people use our devices, not when they buy our devices.”

However, it seems that the tablet market may have matured — and will not ultimately achieve the tremendous ubiquity of smartphones.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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