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Apple's CEO is sharply focused on the iPad with Hints of Significant Innovation on the Way

1. Apple Financials Related, Q
While Apple's CEO Tim Cook fielded most of the analysts questions during their Q3 Financial Conference Call today on a wide variety of matters from the impact of iPhone trade-in programs through to Japan's new VAT (Value Added Taxes) that will play havoc on short-term iPhone sales (smartphone sales in general), it was the iPad that Cook wanted to spend more time on. Apple's iPad sales were incrementally down as noted in Apple's press release posted earlier today. Yet Cook was really pumped up about future iPad developments and so this report takes a look at a few of Cook's comments on this important market segment.


Apple's CEO Tim Cook started off by saying that "iPad sales met our expectations but we realize that they didn't meet many of yours. Ours sales were gated in part by a reduction in inventory and in part by market softness in certain parts of the world. For example, IDC's latest estimates indicated a 5% overall decline in the US tablet market as well as a decline in the western European tablet market in the June quarter."


Then, like Cook has done so many times before, shifted the focus of the iPad conversation away from strictly numbers for a moment to emphasize what's more important. Cook noted that "What's most important to us is that customers are enjoying their iPads and using them heavily. In a survey conducted in May by ChangeWave Research, iPad Air registered a 98% customer satisfaction rate while the iPad mini with Retina display received an astonishing 100% customer satisfaction rate.


The survey also found that among people planning to purchase a tablet within 90 days, 63% plan to buy an iPad and our own data indicates that more than half of customers purchasing an iPad are buying their very first iPad.


In the big picture, Cook noted that "The market is very bifurcated on iPad. In the Brics countries (Brazil, China, India, Russia, and South Africa) the iPad did extremely well. The growth was very high. In China it was in the 50's, in the Middle East it was in the 60's. In the developed countries like the US the market is clearly weaker there.


The IBM Deal will push iPad Sales on a Faster Trajectory


Cook then wanted to remind analysts of their landmark partnership with IBM that came to light last week in context to it boosting future iPad sales. Cook noted that Apple's theory that tablets would surpass PC's over time is still intact but that Apple still needs to add certain things to get the sales on a faster trajectory. "And now I think we're on to something that could really do that," referring to the IBM partnership this is bringing fresh from the ground up native iPad applications for the enterprise.


"We think our partnership with IBM providing a new generation of mobile enterprise applications designed with iPad legendary ease of use backed by IBM's cloud services and data analytics will be one such catalyst for future iPad growth." The IBM deal was perfectly timed so as to give Cook that card to play at today's table and it was effectively and brilliantly played by Cook.


Significant Tablet Innovation Coming to the iPad


In other random notes, Cook noted that "We're very bullish about the future of the tablet market and we're confident that we could continue to bring significant innovation to this category through hardware, software and services.


Cook later talked in broad strokes about the iPad by saying that the "category that we created a little of four years ago has now sold over 225 million iPads to date." Adding that "The category is in its early days and that there's significant innovation that could be brought to the iPad and we plan on doing that."


Interesting Commentary about iPad in Education


In respect to education, Cook stated that "It's interesting to note however that in the US for example, we had a very strong Mac market. And so there's probably a bit of Higher Ed clearly still very much notebook oriented and yet K12 on the other hand we sell 2.5 iPads for every Mac."


Earlier today a rumor out of China pointed to a possible iPad mini Air surfacing this fall and that a 12.9 inch model was still in the works which could address the "Higher Ed" segment that prefers the MacBook over a tablet. I got the feeling from Cook that he's aiming to bring Higher Ed iPad stats more into line with the iPad ratio that has taken hold in the K12 market.


That could mean adding a hard case with a keyboard for the iPad, delivering a new soft cover with a keyboard or create a 2 in 1 kind of hybrid. The Wintel 2 for 1 model has a notebook running a desktop OS and when the display is attached to the keyboard and when it's detached it shifts to a mobile OS for easy touch orientation. Though hours ago Microsoft's CEO announced a new merged operating system is on the way. How Apple will deal with this is in the future unknown at this time. Does Apple want a pure iOS solution or a dual OS solution? Only time will tell.


With Microsoft's Office now on the iPad, Cook's hint about the Higher Ed market in contrast to the K12 market could be pointing to delivering a solution to win over the Higher Ed market away from their MacBooks. This will be something to watch for over the next two years.


In the end the good news is, whichever form it takes, that Apple's CEO says that "significant innovation" is coming to the iPad so as to take "the category that they created" to the next level. I think we can bank on that happening in good time.


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