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TheStreet Open House

Are Consumers Losing Interest In Tablets?

NEW YORK (TheStreet) -- Tablets had historically been a very hard sell for computer manufacturers until Apple's  (AAPL) introduction of the iPad changed consumers' priorities.

But recently iPad sales have begun to slow, with Apple announcing unit sales had fallen more than 9% in the quarter following a 16% decline in the previous quarter. Back in 2012, Apple was proudly announcing quarterly sales jumps of nearly 85%. Rival Microsoft (MSFT) has been spending millions to push its Surface Pro tablet/PC with moderate success, and Google (GOOG) Android tablets are selling but they're getting less expensive every day further shrinking razor-thin profits.

Does this signal the beginning of the end for tablet computers?



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"The sales cycle of iPad remained in negative territory during the June quarter as the tablet market has shown signs of softening," Cantor Fitzgerald analyst Brian White said in a research note. "Apple reported iPad units of 13.3 million (down 19% QoQ and down 9% YoY) but better than our 11.5 million projection. Apple indicated iPad unit sales met the company's expectations but was below analyst estimates."

Reached by phone, White said the tablet market "has hit a wall for sure." Unlike consumers buying new model smartphones every two years White noted that iPads have been around for only four years and questioned "how often do users really need to upgrade their tablets?"

Microsoft Surface devices have struggled from the day the products were announced. Even now in their third-generation, they're still struggling. Surface devices were introduced running what was then a brand new, completely overhauled and somewhat confusing Windows 8 operating systems. It forced Windows users to deal with with two different home screens but without the familiar Windows Home button, on top of the confusion between Windows and Windows RT.

Windows RT was designed to bring Windows, in some form, to battery-friendly ARM- (ARMH) based systems-on-a-chip devices. In reality, Windows RT turned out to be a somewhat crippled version of the full OS. Windows RT devices could do nearly everything a full Windows 8 computer could do except for allow users to download/install/use third-party applications. It never came close to being able to compete with iPads on any level.

Thankfully, we'll probably never see another Windows RT device again. Buried in it's quarterly earning statement on Tuesday Microsoft announced that it would not be releasing a third-generation Windows RT device called the Surface Mini. The Mini project had been snuffed shortly before the company announced its Surface Pro 3 device a few weeks ago. At the time Microsoft said the devices had been delayed.

The official statement contained the Mini's and probably the operating system's obituary "current year cost of revenue included Surface inventory adjustments resulting from our transition to newer generation devices and a decision to not ship a new form factor." However, you can still find listings for Surface Mini accessories on Amazon.com.

During yesterday's earnings call, Microsoft CEO Satya Nadella put the final nail in Windows RT's coffin, as he announced Microsoft's plan to produce three separate Windows operating systems was officially dead. In his opening remarks, Nadella said the next version of Windows will be "streamlined" from three different OSes into "one single converged operating system for screens of all sizes" which should "drive a more coherent user experience."

Apple, on the other hand, isn't ready to give up on iPads just yet. While Apple CEO Tim Cook says iPad sales are still growing at a rapid pace in China and the Middle East the company is also turning to IBM  (IBM) for its expertise with secure business applications. Apple hopes to increase the iPad's popularity for business and retail users.

The iPad's future is also connected to any of the larger iPhones that Apple is rumored to be coming later this year.

-- Written by Gary Krakow in New York.

To submit a news tip, send an email to tips@thestreet.com.

Gary Krakow is TheStreet's Senior Technology Correspondent.

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