SAN FRANCISCO (TheStreet) -- Apple (AAPL - Get Report) has been seeing slowing iPad sales and will be looking to reinvigorate growth from its second-biggest product line. The iPhone is obviously the company's best-selling product and a new version is expected in the fall. However the next iPad is likely to prove whether or not tablets can really overtake the PC.
In Apple's fiscal second-quarter, the company shipped just 16.4 million iPads, generating $7.6 billion in revenue. Both revenue and units shipped fell sharply, with revenue falling 34% sequentially and 13% year over year, and shipments falling 37% sequentially, and off 16% year over year.
On the earnings call, CEO Timothy D. Cook noted the reasons for the slowdown in sales. "First, in the March quarter last year, we significantly increased iPad channel inventory, while this year we significantly reduced it," Cook said on the earnings call. He also noted that last year, in the December quarter, there was a "substantial backlog with iPad mini that was subsequently shipped in the March quarter," whereas this year Apple had a supply and demand balance.
Despite this perceived slowdown, Cook noted Apple continues to believe in the tablet market. "We continue to believe that the tablet market will surpass the PC market in size within the next few years and we believe that Apple will be a major beneficiary of this trend," the CEO said. The concern about the tablet market has been that larger smartphones, particularly those known as "phablets," can do everything a tablet can, as well as make calls, providing little reason for consumers to keep purchasing them in droves. Research firm IDC recently lowered its projections for the tablet market this year, as it now expects 245.4 million tablets (including 2-in-1 devices such as the Microsoft (MSFT - Get Report) Surface Pro) for 2014, down from a prior view of 260.9 million units, up just 12.1% year over year, citing the rise of tablets. "Two major issues are causing the tablet market to slow down. First, consumers are keeping their tablets, especially higher-cost models from major vendors, far longer than originally anticipated. And when they do buy a new one they are often passing their existing tablet off to another member of the family," said Tom Mainelli, Program Vice President, Devices & Displays at IDC in the May forecast. "Second, the rise of phablets -- smartphones with 5.5-inch and larger screens -- are causing many people to second-guess tablet purchases as the larger screens on these phones are often adequate for tasks once reserved for tablets." Following the successful branding of the iPad Air, Apple is expected to keep the iPad Air name, as it gets set to refresh the tablet line (Apple currently sells 4 iPad models), perhaps as soon as this fall. Here's what consumers and investors alike can expect to see from Apple, as it looks to build on the initial success of the iPad, and reinvigorate iPad revenue growth for shareholders.
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