8 Reasons The iPad Mini Launch Should Have Failed

| About: Apple Inc. (AAPL)

During Apple's (NASDAQ:AAPL) iPad mini event, CEO Tim Cook displayed a informational slide that showed Q2 2012 iPad unit sales exceeded the i (ndividual PC shipments of all vendors including Acer (OTC:ASIYF), Dell (NASDAQ:DELL), Lenovo (OTCPK:LNVGF) and HP (NYSE:HPQ). Cook took his iPad vs. PC message a step further on the earnings call when he said, "We continue to be very confident that the tablet market will surpass the PC market...When you look at the size of the PC market, there is an enormous opportunity for Apple there. Pretty much each quarter you see 80 to 90 million PC's being sold. And so we do think that the iPad and the iPad mini and the iPad 2 will all be extremely attractive offerings for people in lieu of PC's."

A new survey by Cowen and Co. reveals that the iPad mini isn't cannibalizing sales of iPad but is instead doing exactly what Tim Cook had in mind... taking market share from PC's. The survey revealed that 12% of U.S. adults plan to purchase an iPad mini in the next 18 months and of those 12%, a staggering 52% said they've never owned a tablet before. Furthermore, out of those who said they plan to purchase an iPad mini, only 16.6% said they'll be purchasing it as a replacement for another device, with 42% of those people saying it will replace their Windows PC. Cowen analyst Matthew Hoffman explained:

Since 52% of the iPad mini intenders in our sample did not own a tablet of any type, we see it successfully positioned as likely to penetrate new entry-tier segments... It's low price also looks like an important tool to capture new consumers' attention.

The process in which Apple's lineup of iPad's becomes a PC substitute is happening before our eyes. This holiday quarter is set to be a tipping point in this evolution as it represents the first time Apple has offered a $329 entry point. The iPad mini and iPad 4 sold 3 million units on opening weekend despite the following eight reasons why this particular launch had every reason to fail:

  1. Price/Competition. Analysts feared that the $329 price point wasn't low enough to drive demand, especially with Amazon (NASDAQ:AMZN) offering its Kindle Fire at $199.

  2. The mini launched only six months after the iPad 3 release.

  3. The mini launched only weeks after the iPhone 5 release.

  4. The mini launch missed back to school shopping season.

  5. The mini launch occurred before the holiday buying season.

  6. The mini screen relies on old technology, there is no retina display.

  7. The mini sales numbers represented WiFi-only models.

  8. Most Apple fans already own an iPad or two.

Despite these eight obstacles Apple was able to sell 3 million iPad's on opening weekend. If opening weekend had included the WiFi + cellular models, it would have approached the 5 million unit level of the mighty iPhone 5!

Apple innovation continues to increase at an increasing rate. The earlier-than-expected launches of products like the iPad mini, iPad 4, and iMac are indicative of an Apple that is better than it's ever been. The only comparison to Apple is Apple itself. It's why we compare 2012 to 2011 to 2010 and so forth. No other company or stock deserves to be mentioned in the same sentence. As far as the data is concerned, there are no other tablets. Onswipe reported that iPad commands 98.1% of tablet-based web browsing and 54.5% of all mobile web traffic, which is almost triple that of the iPhone. The iPad takeover of the PC industry carries more than enough ammunition to serve as a fundamental reason to reverse Apple's $170 stock sell-off. Apple's strong fundamentals remain the envy of the tech sector. Any commentary to the contrary can be classified as irrelevant noise. Look at the scoreboard.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , , , Personal Computers
Problem with this article? Please tell us. Disagree with this article? .