Apple Inc. (NASDAQ:AAPL) appears to be going all in on the “Pro” strategy to boost slumping iPad revenue, if not actual sales numbers. A report from Japan’s Mac Otakara has a trio of new iPad Pro models being released in spring, 2017.
The move may not actually sell any more iPads than Apple does now, but even if it doesn’t, AAPL stands to boost its iPad revenue thanks to the premium pricing on the iPad Pro.
iPad Sales Slide
Revenue from iPad sales still represents a considerable chunk of AAPL’s bottom line. In the last quarter, it was $4.88 billion on sales of 9.95 million units. That’s just over 10% of the company’s total revenue for Q3 2016.
However, that number has been sliding for three years. In Q3 2013, iPad sales numbered 14.6 billion. This isn’t an Apple-specific issue. Tablet sales worldwide declined 12.3% in Q2 2016, and AAPL actually did better than many competitors.
However, iPad sales are a more important revenue generator for Apple, than they are for, say, Amazon.com, Inc. (NASDAQ:AMZN), who doesn’t even bother to release numbers for its Kindle Fire tablets.
iPad Pro to the Rescue?
In the latest quarter, the average new iPad sale for Apple was roughly $490. But in Q3 2013, when the sales numbers were much higher, the average price per unit works out to about $436.
That difference in average selling price can be attributed to the iPad Pro.
Since Apple first released the iPad in 2010, the base price of the latest new iPad had been $499. The exception was the release of the iPad Mini in 2012 for $329. But in 2015, AAPL shook things up with a new 12.9-inch iPad Pro at $799.
The bigger move (no pun intended) was 2016’s 9.7-inch iPad Pro at $599. This time, Apple decided to sit out updating the aging iPad Air 2, so rather than a new iPad at $499 this year, the latest new iPad was $599.
AAPL to Go All-In on iPad Pro in 2017
Apple has been expected to ditch the iPad Mini sooner rather than later. It was introduced to fight off cheap, 7-inch Android tablets introduced by Amazon, Samsung (OTCMKTS:SSNLF) and others. With the popularity of the 5.5-inch iPhone Plus — seen as cannibalizing its sales — the iPad Mini’s days seemed numbered.
However, Mac Otakara (a blog which was first to predict the iPhone 7 would ditch the headphone jack, gain a new Home button and be offered in two black color options) is predicting AAPL will release three new iPad Pro models next spring.
According to Mac Otakara, the 12.7-inch iPad Pro will be back, as expected. The 9.7-inch iPad Pro will grow slightly to 10.1-inches. And, the iPad Mini will become a new 7.9-inch iPad Pro, complete with Smart Connector, 4-speaker audio and True Tone display.
Increasing the size of the 9.7-inch iPad Pro to 10.1-inches is a relatively small tweak, but makes it more friendly to business users and is a symbolic break from the past. The original iPad was 9.7-inches, a size Apple always maintained was optimal. But AAPL is now chasing professional that want a larger display for text and numbers, not consumers…
And by not jettisoning the iPad Mini altogether, but instead making it an ultraportable iPad Pro, AAPL can consolidate all its new iPads under the “Pro” umbrella. Ultimately, that simplifies the product line-up.
It also leaves one tablet that’s current and affordable for consumers, in the 7.9-inch iPad Pro. And, it jacks up the average selling price for an iPad — despite consumer resistance to pay more — boosting revenue.
If Apple could actually sell more iPads instead of less, combined with that increased selling price per unit, the tablet business could continue to be one of AAPL’s revenue pillars. And while that scenario seems unlikely based on the past three years, at least some people think iPad sales are near to reaching bottom and due for a rebound.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.