The Cupertino, Calif., company surprised Wall Street on Wednesday with the news that sales of the iPad had declined from 7.33 million units in the first quarter of fiscal 2011 to 4.69 million in the second quarter. In spite of the decline in iPad shipments, Apple still posted impressive numbers with a 95 percent jump in profits since last year and the largest year over year quarterly revenue growth in the company's history.
On average, Wall Street analysts had expected Apple to report a more modest decline to 6.2 million iPads. Analyst Ming-Chi Kuo of Concord Securities predicted a relatively accurate sequential decline to 4.6 million iPad shipments in a Product Shipment Outlook report sent to AppleInsider earlier this week.
Kuo cited the transition from the first-generation iPad to the iPad 2 as the primary reason for the decline. Apple Chief Operating Officer Tim Cook admitted on Wednesday that product transitions are "never simple," noting that the company had drawn down 570,000 original iPad units and added 170,000 new iPad 2s into the channel at the end of the March quarter.
Cook admitted that the iPad currently has "the mother of all backlogs," but reassured investors that he was confident in Apple's ability to produce a "very large number of iPads" in the June quarter.
"I'm extremely pleased with the progress of the manufacturing ramp," said Cook, adding that Apple plans to release the iPad 2 in 13 more countries next week. Apple had previously announced intentions to launch the device in Hong Kong, Korea and Singapore by the end of April.
According to Kuo, iPad 2 shipments will rise "by a big margin" in the third quarter of fiscal 2011, "jumping over 100% sequentially." Kuo also claims that the white iPad 2 appears to be more popular than the black model. The white version accounts for 60 to 65 percent of iPad 2 shipments, his report noted.
Kuo estimates that iPad competitors will also ramp up shipments in the June quarter. Android tablet shipments will be 2.5 million to 3 million units in the quarter, with Acer shipping the most at 30 to 40 percent. Meanwhile, the shipment forecast for Research in Motion's BlackBerry PlayBook is "not bad" and is expected to reach 2.5 million units in the second quarter of 2011.
Despite the iPad's rivals being off to a "good start," Kuo warned that competitors will need to watch "sell-through and return rate closely," given that tablet shipments may not convert to actual sales.
For example, the Samsung Galaxy Tab, one of the first tablets shipped to compete with the iPad, reportedly has a 16 percent return rate, compared to Apple's 2 percent rate for the iPad. Samsung boasted earlier this year that it had shipped 2 million units to inventory channels, while conceding that actual sales to consumers did not occur as fast as expected.
J.P. Morgan analyst has predicted that the iPad 2 could cause a "bubble burst" for rival tablet makers, who may have inflated build plans in order to secure components, but could fail to sell the device if tablet shoppers continue to overwhelmingly choose the iPad.
Kuo asserted that CDMA iPhone shipments had become "a bit sluggish," citing more smartphone choices for Verizon subscribers as a probable cause. U.S. iPhone sales jumped up an impressive 155 percent from last year, with Verizon's share of the lot expected to stand at roughly 3 million.
According to the analyst's report, the GSM version of the iPhone 4 accounted for 70 to 80 percent of Apple's total iPhone shipments in the second quarter of fiscal 2011. Kuo cautioned that iPhone shipments may flatten for the June quarter, due to competition from Android phones from HTC, Samsung and Motorola, impact from the Japan earthquake on the supply chain, and preparation for the move to the iPhone 5 in the third quarter of 2011.
Sales of the iPod continued to decline in the March quarter, dropping 17 percent year over year to 9.02 million units, though Apple said the sales figures were "ahead of [its] expectations." The company revealed Wednesday that sales of the iPod touch comprised more than half of the total sales of iPods last quarter.
Kuo believes that iPod sales fell due to "weak demand in slack season of consumer electronics" and the fact that the iPhone receives first priority in components share between the iPhone and the iPod touch. He also speculates that iPod shipments will be flat in the June quarter for the same reasons.
Regarding the second-generation Apple TV, Kuo estimates that Apple has shipped a total of 2 million units, with 820,000 shipped in the March quarter alone.