Every so often, someone in technology points out a trend so unexpected, so startling, that for a time, no seems to know how to respond. The market received just such a "say what?" moment on Wednesday of last week when the CEO of Best Buy (BBY), Hubert Joly said, when speaking to the website Re-Code, "The tablets boomed and now are crashing. The volume has really gone down in the last several months. I think the laptop has something of a revival because it's becoming more versatile."
This came as a surprise to many analysts, who still consider the tablet market the place to be. It must be heartbreaking to Satya Nadella who has thrown everything he has behind Microsoft's (MSFT) push into the tablet market.
So how can we gauge the health of the tablet market? With difficulty, since 30% of the market is made up of a large number of competitors who's relative strength vs. each other varies considerably from quarter to quarter. Fortunately, approximately 70% of the market is controlled by Apple (AAPL). While we know it isn't a complete picture, let's look at how Apple's iPad sales are going, based on the company's earnings reports. Here is the product summary section of the most recent, (Q3 2014) report.
Sure enough, Apple's most recent earnings report shows that sales of iPads fell markedly between Q2 '14 and Q3 '14. But wait, we don't measure the success of a technology company by looking at quarter-after-quarter performance, we look at quarter vs. year-ago quarter performance. Here are the numbers from Q3 '13, added to our image.
Now we can see that Apple's iPad unit sales in Q3 '14 decreased by 9.2% from the year-ago quarter, and that the company's revenue from iPad sales decreased by only 7.7%. That's a slowdown, to be sure, but it's not much of a crash. Put another way, the decrease in volume noted by Joly was, in fact, an expected seasonal decrease. So why would he call that a crash? There is no reason why he would, unless of course, the sales he was seeing at his own store were decreasing at a greater rate than those in the rest of the market.
Conclusion: It isn't tablets that are crashing; it's Best Buy. The winner is Apple, the loser is Best Buy. Easy as pie, and all right there in the published numbers. As for Microsoft, Samsung and Google (GOOGL), a collapse of the tablet market would be bad news, if, in fact, it were really happening, but for the present, at least, there is no reason to think that it is.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.