However, there is a ray of hope. Moskowitz believes the iPad mini actually has better margins than the iPad. "The silver lining here is that our research indicates that gross margin on the iPad mini could be better than the larger iPad, which is partly why our consolidated gross margin assumptions are improving for the Dec-Q and out quarters," Moskowitz wrote in a note. He rates Apple "overweight."

Demand for the iPad and iPad mini is not shifting to other companies, it's shifting between Apple products. CEO Tim Cook has repeatedly said Apple doesn't worry about cannibalizing its own offerings. "... S o we've learned over the years not to worry about cannibalization of our own products, it's much better for us to do that than somebody else to do it...," Cook said on Apple's fourth-quarter earnings call. He noted that there are still over 300 million PCs being bought each year, and that Apple would rather eat into that market than worry about cannibalizing itself.

Demand for the iPad isn't slowing down. If anything, it appears to be heating up, as consumers realize the benefits of the iPad mini. Now, if only Apple could keep them in stock.

-- Written by Chris Ciaccia in New York

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