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Another Look at the Apple Juggernaut

How could it be otherwise? The latest and greatest iPad became available for preorder on March 7th. Through Friday, you could even be assured of delivery by March 16th. But the news came down Saturday that demand was, as expected, “off the charts,” and the initial allocation for online delivery was gone. You could take your chances at a local retailer, most likely an Apple Store, when the thing goes on sale, and take your chances, or just be patient.

When I wrote this article, Apple’s online store listed two to three week delivery times. Best Buy’s site, as of the time I checked, was dominated by what we call the iPad 3, with no online ordering option. But they promised they’d have them in stores on launch day. Obviously, they didn’t promise how many would be available for each store, or in which configuration. But you could still order an iPad 2 if you wanted.

Sellouts shortly after an iPhone or an iPad are introduced are the norm. You expect that sales of every new model will exceed the previous version by a huge margin. But isn’t Apple also facing the inevitable slowdown in sales growth that affects all large companies eventually? At same point, expected demand will be saturated, and sales growth will more and more depend on replacements. The bigger, bolder, badder syndrome can only go so far.

Certainly, the iPod is an example of a product that’s past its prime. While Apple continues to have well over 70% of the market, these days more and more people are using smartphones as portable musical players. Consider the iPhone the ultimate iPod.

When it comes to mobile handsets, they are replaced frequently, usually when the contract is up. Then you are inundated with lots of promotional material about the latest and greatest, and don’t you want to reup for another two years? Surely the iPhone 4s benefitted from this replace cycle, as folks with the iPhone 3GS and older models were only too ready to upgrade. The same is true for the third generation iPad, even though there are no wireless contracts to expire — or break. A surprisingly large percentage of users are reportedly considering the new model. I suppose they’ll either hand off the old iPads to family members, or maybe sell them on eBay.

The real question, however, is how long can Apple sustain 50% and 100% annual sales growth curves before most everyone who wants an iPad will have one — or a successor product? That’s the dilemma PC makers are confronting now, as sales growth slows, and the largest increases are occurring in newly developed countries, where millions are buying their first PCs. Even in the PC market, Apple manages to exceed the sales growth rate of the industry year after year. Only a small percentage of possible customers are buying Macs, but they may actually move to the iPad instead in the years to come.

If what Steve Jobs said about the Post-PC era is correct, more and more people who might have bought a PC will choose an iPad instead. The PC will remain the pick-up truck bought by heavy-duty users, but in much smaller quantities.  Over the years, PC sales will inevitably decline, and Mac growth will trail off. Eventually, the Mac will be where the iPod is now, yesterday’s product catering to a smaller and smaller user base until something else comes along that replaces the PC and, perhaps, even the iPad.

Yes the iPad is a new market, and I hesitate to call it a tablet market simply because other companies have gone nowhere. Even the Amazon Kindle Fire is little more than a glorified e-book reader with mobile computing pretensions. But that might be all Amazon wants or needs. If you want a general purpose tablet, you go to Apple.

Over time, there will likely be mobile computing devices that will make an iPhone and iPad seem obsolete, although both form factors seem so basic in what they do. Even “Star Trek” had mobile handsets (the “communicator”) and a tablet of one sort or another. Until we are internally wired with all the computing and communications implants we need, maybe these two will be the fundamental solutions.

Regardless, expecting Apple to continue to grow as fast as it is now year after year is a stretch. If they did, they’d overwhelm the planet in the not-too-distant future. Over time, the revenue curve will no doubt flatten. They will have to continue to move out into different markets to sustain the brand. Some day, another company, barely a startup now, might succeed Apple on the world’s stage. Success isn’t guaranteed, success isn’t forever, as so many multinational corporations have come to realize.

Or, if humans venture out to the stars in the decades to come, those corporations might grow with them. Maybe the Apple of 2112 will be selling to a galaxy-wide audience. Some of the competition may not even be, well, human.

But as we leave our sci-fi world, Apple can still grow at a decent clip for a number of years, although at a slower rate, even if they are destined to be Earthbound.