Apple's Big Expensive iPad push has kept iPad revenue flat, at least for now

Apple just reported its fourth quarter earnings for 2016, showing a decline in iPhone sales for the third consecutive quarter and the first full-year drop in revenue since 2001. iPad sales were down as well, both year over year (-6 percent) and from the third quarter of this year (-7 percent). Just 9.3 million iPads sold this quarter.

This isn't exactly surprising when you look at trends in the broader the tablet market. According to research firm IDC, worldwide tablet shipments were down 12 percent in the second quarter of this year, and the vast majority of the tablets that did sell were Android-based.

But Apple's revenues from iPad were flat, showing zero year-over-year changes. This contrasts with both the iPhone and the Mac product lines, which showed 13 percent and 17 percent year-over-year revenue declines, respectively. In other words, Apple is selling fewer iPads, but it has made the same amount of money from them in the fiscal year 2016 that it did in fiscal year 2015. And iPad's average selling price of $459 was up $26 from a year ago.

Apple has wedged itself firmly at the very high end of the tablet market

This is largely attributable to the rollout of iPad Pro, which Apple first introduced in November of 2015. The 12.9-inch, thousand-dollar iPad Pro is certainly more iPad than most average consumers need; but Apple's pitch that the tablet is good for designers, power users, or people who run heavy-duty enterprise apps appears to be working at least in those fringe cases.

And with the the 9.7-inch version of iPad Pro, which launched in March of this year, Apple married the power of the new iPad with a slightly more accessible price point ($599). In other words, Apple has set a new tablet standard even for itself this past year, and has placed itself firmly at the very high end of the market.

It's hard to know where the iPad market will go from here, especially with impending promises that Apple's MacBook line will become even thinner and more powerful. As laptop and tablet form factors converge, the biggest difference between the two will be the differences in their operating systems — and the different ways in which they lure customers into buying more Apple "services," the fastest growing segment of the company's product lineup.

For now, though, iPad's revenue staying flat is about as good as Apple can ask for in a series of quarterly declines.


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