With no new iPad expected until October or later, I expect this revenue growth figure to end up close to zero by the time Apple closes the books on FY13. Moreover, in light of the iPad mini’s relatively low gross margin, the iPad product line can reasonably be pegged as the main cause of Apple’s profit decline this year.
It’s safe to say that the iPad Mini hasn’t lived up to expectations. This product was supposed to destroy the Android tablet market by narrowing the price gap between the iPad and popular competitors like the Nexus 7. Instead, Android tablet vendors have gained ground on Apple in the past year.
In light of the iPad Mini’s strong initial sales and long period of supply constraints, it doesn’t seem that Apple Inc. (NASDAQ:AAPL)’s problem was product quality or pricing. Instead, Apple Inc. (NASDAQ:AAPL)’s biggest problem was bad timing. When the iPad Mini went on sale in early November, Apple ran through its initial supply meeting the demand from hardcore fans and early adopters. That situation made it impossible to build up enough inventory to meet strong holiday season demand. By the time iPad Mini supply reached a normal level, seasonality was working against Apple, leading to a sharp drop-off in sales.
If Apple follows the same iPad release schedule this fall, it will encounter some of the same problems. It’s very unlikely that the company will be able to build up inventory of the new iPads fast enough to meet seasonally strong demand. Some of that demand may remain “pent-up” and translate to strong March-quarter sales. However, by then, plenty of potential customers could bail out and purchase an Android tablet (or a totally different gift) instead.
Foolish bottom line
For the most part, I think tech analysts pay too much attention to timing issues. When a new product release doesn’t quite line up with the previous launch cycle, it can have a dramatic impact on quarterly earnings. However, from a longer-term perspective, it usually has no impact on the company’s earnings stream.
In this case, though, timing could be crucial. Apple’s supply constraints last fall opened the door for Android tablet vendors to gain share. Looking forward to this fall, the earlier the iPad hits the market, the better off Apple will be. Even if a September launch is out of the question, an early or mid-October on-sale date would give Apple more time to fulfill initial demand and build up holiday inventory. If iPad supply constraints once again hamper Apple this fall, Android will move another step closer to dominating the tablet market share battle.
The article Is Apple Making Another iPad Blunder? originally appeared on Fool.com is written by Adam Levine-Weinberg.
Fool contributor Adam Levine-Weinberg owns shares of Apple and is long January 2015 $390 calls on Apple. The Motley Fool recommends and owns shares of Apple and Google.
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