Apple just had its best quarter ever. While it was expected to have a great holiday season, no one saw the unbelievable numbers coming: 37 million iPhones sold, 140 million downloads on Christmas Day, $97 billion in the bank. A good chunk of that success was fueled by the iPhone 4S, which turbocharged worldwide iPhone sales, but the iPad reached heretofore unseen popularity, too, with 15.4 million tablets sold — a 111% increase from the same period a year ago.
Clearly, a lot of people got iPads as holiday gifts in 2011. However, yesterday I asserted that a sales number that didn’t show a good-size jump compared to the quarter-over-quarter spike from the 2010 holiday season, would indicate the iPad may have a serious challenger on its hands in the Amazon Kindle Fire. Since the Kindle Fire is priced at less than half the cost of the iPad, many predicted that might happen.
I stand by that assertion, even though my mark of where the “Kindle effect” might become obvious was probably off. (I said 16 million iPads–3 million fewer than a spike that would have matched the size of the previous year’s–might be cause for alarm. It was a guess I inserted at the last minute.) Most analysts were predicting between 13 -15 million units, which is pretty close to what the actual number was.
To sell 15.4 million iPads, up from 11.1 million the previous quarter, is certainly not a panic situation. It’s a great number, and even though the Kindle convinced a million or so people to pick one up instead of an iPad, clearly they’re outnumbered by people who prefer an iPad. Apple CEO Tim Cook, for one, isn’t too worried:
“I looked at the data, particularly in the U.S., on a weekly basis after the Kindle Fire launch,” Cook said during yesterday’s earnings call. “I wouldn’t say that there was an obvious effect on the numbers, plus or minus… We don’t see these limited-function tablets and e-readers as being in the same category as iPad. They might sell a fair number of units, but we don’t think people who want an iPad will settle for a limited-function device.”
On the other side, though, I’m sure Jeff Bezos will exude nothing but joy and confidence when Amazon reports its earnings next week (Jan. 31). Amazon has never broken out Kindle sales, but it’s already let on that the Kindle Fire has been a pretty big hit for the company, boosting overall sales in the Kindle line to at least 4 million, including ereaders. Considering the original iPad sold 3.2 million units in its first quarter on the market, that’s more than respectable.
The obvious conclusion, which many have predicted: The tablet market is splitting in two. The iPad continues to be the gold standard, backed by iOS and its 170,000 tablet-specific apps. But the Kindle Fire points users directly to Amazon’s popular content platforms, and many owners see its smaller size and focus on media as advantages — especially when you consider it’s $300 cheaper than the least-expensive iPad.
Of course, we’ve seen “high-end” tablets (like the Motorola Xoom) and low-end devices (anything from Archos) try to make an impact on both parts of the market, but the common thread between the two success stories is the strength of their ecosystems. After all, the iPad wouln’t be nearly as useful without its apps, and the Kindle Fire would just be another Android tablet without Amazon’s customized portal.
A bifurcated tablet market sets the stage for Google, Samsung, Sony, Microsoft and others as they continue to vie for meaningful market presence in 2012. Attacking the iPad’s top end has been a losing battle, but now Amazon has shown there’s significant demand on the lower end, too. Serious players would do well to focus their efforts there, especially since the iPad now looks more unbeatable than ever.