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2/12/2013 8:57:04 PM
Citi analysts Glen Yeung, Walter H Pritchard and Jim Suva think that Apple (NASDAQ: AAPL ) has reached the end of the line for tablet growth. "Apple has again lost tablet market share (despite the introduction of the Mini), holding a still dominant 38.8%, but down from its 56.8% 2Q12 peak," they wrote in a report this week.
Citi said that Samsung and Amazon (NASDAQ: AMZN ) were the beneficiaries of Apple's decline. Samsung's market share rose 13.1 percent while Amazon rose 15.5 percent, indicating that the Kindle Fire is still a very popular item.
Beyond the "overall share loss," Citi said that the data reveals a "particular slowdown" in 10-inch iPad sales within mature markets.
This assessment corresponds with aonther report , which argued that Apple was forced to release the fourth-generation iPad last fall because the existing model had become a stale product.
"After analyzing the data, we have new concerns about the health of the 10-inch tablet market and, absent any material innovations (we do not count a Retina Mini or lighter/thinner iPad 5 among these), we remain concerned about Apple's ability to maintain market share," Citi added. "While we ultimately envision a larger overall tablet market than third-party forecasters, we view these tablet trends as supportive of our contrarian neutral stance on AAPL."
Citi believes that the iPad Mini did cannibalize the full-size model in the United States and Japan. The Mini was not the only problem, however. The rise of smaller, cheaper and lighter tablets -- including those from the manufacturers listed above -- is becoming a big problem for Apple.
"We believe Apple will launch an iPad Mini Retina and a thinner/lighter iPad 5 (both likely sporting newer processors) in 3Q13," Citi affirmed, echoing the estimates of another analyst . Citi added that while the iPad is evolving, "innovation of this nature is insufficient to reverse share loss."
The analysts are also concerned about Apple's future in the smartphone business. "With iPhone 5 failing to drive market share gain within smartphones, our concerns about Apple's once dominant market position in portable, connected, compute devices are stoked," Citi wrote in its report.
Finally, Citi said that if Intel (NASDAQ: INTC ) is able to sell its new Haswell-based Ultrabooks for as low as $599, that could create additional competition for the 10-inch iPad.
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