Tim Cook: Slumping iPad Sales Lead To Apple-IBM Partnership


Apple CEO Tim Cook revealed during his company’s quarterly earnings call last night that iPad sales were down in the June quarter from last year, and that was a reason behind the decision to partner with IBM.

iPad sales dropped for the second consecutive quarter, down 9.2 percent from the year-ago quarter, after falling 16 percent three months earlier. Apple sold $5.8 billion worth of iPads on 13.2 million units.

When speaking on the slump in tablet sales, Cook pointed to a reduction in channel inventory and an overall decline in the tablet market.

Related: That's About The Size Of It: Tablet Market Declines For The First Time

In the January quarter of this year, 56 million tablets shipped worldwide, compared with 59 million in the year-ago quarter, according to NPD DisplaySearch. This was the first time the tablet market decreased since the release of the iPad in 2010.

Despite the disappointing numbers, Cook remains optimistic about the future of the product, and called Apple's recent partnership with IBM a huge opportunity to turn iPad sales around through better penetration into the mobile enterprise.

"We think there is a substantial upside in business, and this was one of the thinkings behind the partnership with IBM that we announced last week," Cook said during the Q&A portion of yesterday's earnings call. "We think that the core thing that unleashes this is a better go-to-market, which IBM clearly brings to the table, but even more importantly, apps that are written with mobile first in mind."

Cook sees third-party developers, in addition to IBM, writing iPad-specific enterprise applications, rather than carrying software from laptops and desktops over to the iPad, thanks to the IBM partnership expected to result in increased enterprise presence.

"IBM is one of the most respected names in the enterprise," said Steven Kantorowitz, president of CelPro Associates, an Apple partner based in New York. "Apple is seeing a bigger presence in the enterprise than ever before with software such as MobileIron and Good. The security software allows these companies to introduce iPads into the workspace. With  add-ons such as Divide and CellTrust, business apps for the iPads will only lead to explosive growth."

Cook said he hopes for Apple's enterprise presence to grow from 20 percent to 60 percent as a result of the IBM deal.

The Apple CEO repeated that 225 million iPads have been sold since its release in 2010, but hinted that we have yet to see the product at its best.

"We still feel the category, as a whole, is in its early day," said Cook. "There is also significant innovation that can be brought to the iPad, and we plan on doing that."

Partners agree that Apple's mobile business presence will grow now that IBM is in the picture, and the iPad is a major beneficiary of that.

"It speaks to Apple trying to penetrate the enterprise in a more profound fashion," said Raul De Arriz, national government sales manager for Small Dog Electronics, Waitsfield, Vt., one of the top Apple specialists in the country. "This will put a lot of iPads and iOS devices into the enterprise. It doesn't mean anything if they don't deliver what they are announcing, but if it indeed leads to advanced solutions being developed, they are certainly a stronger competitor."

PUBLISHED JULY 23, 2014