Why the Latest iPad Forecasts Are Wrong

The recent 2012 WW forecast for tablets from IDC which forecasts sales of 106MM units in 2012 with Apple’s iPad numbers at a little under 60MM has been widely picked up and republished across the internet. The report also predicted that Apple could lose dominant marketshare to the Android platform by 2015. Windows tablets do not figure in the IDC forecasts as currently IDC defines them as PCs.

While I’ve a lot of respect for IDC’s ability to identify key market trends, especially in the Enterprise IT market but I’m not convinced they have their finger on the pulse of the Apple iPad market nor Apple’s iOS strategy.

It appears that IDC has consistently under-estimated the iPad market since its launch and their recent forecasts seem to follow that pattern. Just to verify my suspicions I looked back at the IDC forecasts since the launch of the iPad on April 3rd 2010 when Apple sold 300,000 iPads on the first day and 3 million in the next 80 days.

I recall at the iPad launch IDC analysts noting that the iPad would do remarkably well if they sold 5MM units by the end of 2010. IDC subsequently estimated the total number of all tablets to be sold in 2010 at 7.6MM units. But when the final numbers were reported, Apple alone had sold nearly 15MM units. IDC’s forecast for 2011 was set at 44.6 MM units (the final sales for 2011 came in at nearly 69MM units with Apple selling 40 MM units). IDC first predicted 2012 sales of 70.8 MM units – this forecast was increased to 88 MM units and now stands at the 106 MM number announced by IDC a few days ago.

Based on the historical sales growth and the launch of the new iPad it is hard to believe that Apple will sell less than 60MM units in 2012.

With 40MM sales in 2012 – at least a doubling of that number is to be expected. Unlike the original iPad, which initially launched in the US, the new iPad will be sold in 36 countries by March 23rd. The combination of the price reduction on the iPad 2, the new iPad (third generation) and the highly likely launch of the 7.85′ iPad Mini for $299 should drive Apple iPad sales to well over IDC’s forecast number and I suggest that a number well above 80MM units is achievable for 2012 with an annual run rate of over 100 MM units.

IDC is hardly the only analyst firm underestimating Apple’s potential but is one of the most conservative.

The research company also predicts that Android tablets will have a higher market share than the iPad by 2015. Many have predicted that the growth of Android tablets will follow the success of Android smartphones but the markets are very different. The predicted success of Android tablets has not happened so far. The only tablet to get any traction is Amazon’s Kindle Fire. Amazon’s Kindle Fire is a gateway to Amazon’s retail store – it’s not really a tablet strategy – it’s a commerce strategy. To boost their m-commerce platform, Amazon is likely to drive their hardware sales by aggressive pricing – to near zero (perhaps even bundling the Kindle Fire with the Amazon Prime Free Shipping Service).

However, Amazon, if they could negotiate terms with Apple (which is a tall order) could be better off having a Prime app on the iPad rather that being in the hardware business.

At the low end, Android tablets may see some traction where they will be used low cost mobile web browsers and simple readers – especially in emerging countries where low pricing is essential to drive sales. But will customers want a product that has limited functionality, a sub-optimal experience and does not come with a massive eco-system of applications designed specifically for the device?

When Apple launched the iPad many questioned its role as a “Tweener” devices between the smartphone and the PC. Apple was however able to define the category due to the quality of the product, the user interface and experience but more importantly the totality of their eco-system -hardware, software, an apps development platform and a massive distribution system via iTunes.

Related Column: iPad: It’s More Than Just The Hardware

No other company gets close – so today, we don’t really have a tablet market – we have an iPad market. Note that Apple never refers to their product as a tablet – as they associate the tablet with Microsoft’s earlier failures.

Apple’s dominance of the tablet market has significant implications for media companies. Most have assumed that some equilibrium will eventually come into the tablet market, so a strategy of delivering content across multiple devices was a safe distribution strategy, even with the challenge of optimizing for many different devices. The publishers’ consortium Next Issue Media (made up of Condé Nast, Meredith, Hearst, News Corp and Time) decided, after negotiating difficulties, to eschew the Apple platform and support Android. A decision they are probably regretting. The success of the iPad platform lured each of the consortium members to find a way to eventually work with Apple so the value of the consortium is unclear if they remain solely focused on Android.. The question media companies now have to answer is whether the competitive platforms to Apple’s iPad can do justice to their digital publications. Can these platforms meet reader expectations or provide a significant large enough digital distribution channel to drive user and advertiser revenues ?

Apple will never compete for the low revenue, low margin low quality “budget” end of the market. Apple will always prefer a lower marketshare position so long as they maintain a high revenue and margin share of the segment. It’s possible that eventually the sheer numbers of very low cost tablets could outsell Apple’s premium products but I doubt it. Customers won’t be satisfied with an underpowered tablet any more than they were satisfied with the concept of the netbook. It’s much more likely that as smartphones increase in capabilities and significantly drop in price that they will be the mobile devices of choice in emerging markets. The functionality of even low cost smartphones will be superior in virtually every case to low cost tablets (other than display size and even then, foldable displays, 3D and projection could step in to solve that issue).

The tablet expected to take share from the PC market, overtaking it in unit sales by the 2015/16 timeframe. There will be a few specific cases where PC will remain superior to tablets in input and processing power, but that gap will narrow over the next few years and customers will flock to the convenience of the “tablet”. However the size of the tablet market , while significant, is never going to get close to the volume of the smartphone market which will be measured in billions.

We’re living in a world of digital mobility – it’s a multi-screen world – currently the dominant displays are smartphones, ultra-portable laptops, tablets and the TV but as the Corning Concept video suggests that will evolve. Apple’s goal is to take significant market share in each of the segments and bind them all other with an iOS platform that attracts the world’s best developers.

I don’t have IDC’s resources, contacts or detailed knowledge of the industry but I’ve been around the Apple marketplace for 25 years. My predictions are based on both gut and industry instincts – but are far from scientific but I’m willing to wager my 2012 estimates of iPad will be closer to the mark than the IDC forecasts. For the record I predict Apple will sell over 1MM units on March 16th. It will sell close to 10MM new iPad units within the first 30 days of launch as it rolls out t in 37 countries and in 2012 the total sales of iPads will be in excess of 90MM. My colleagues at IDC are willing to bet a nice bottle of wine that they will end up being more accurate than I am. Sounds good to me and no matter who wins I look forward to sharing it while we develop our own 2013 predictions for this exciting, emerging market.

Apple’s stock price is currently around $600, valuing the company over $500 billion. Already analysts are upping their target range to $700. If Apple continues to execute as well as it has this may too be conservative. I only wish I had the foresight to hold the Apple stock I purchased back in 1997.