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Apple's iPad Could be Overtaken by the Mac in Just Three Years

Last quarter, for the first time in nearly three years, Apple 's iPad wasn't its second-largest business -- instead, the Mac generated more revenue for Apple than any of its other products, save the iPhone.

Apple's traditional PCs enjoyed strong growth -- unit sales rose more than 20% on an annual basis -- while its tablets continued to languish, down 13% year-over-year. If these rates of growth and contraction were to continue, Apple could be selling more Macs than iPads by 2017.

That may be unlikely, but it does serve to highlight the major trends affecting Apple's business.

Is the iPad a failure?

Last quarter, Apple sold 12.3 million iPads, generating $5.3 billion in the process. Theoretically, as a stand-alone business, the iPad could be worth well more than $100 billion -- it's definitely not a failure.

But it has failed to achieve the lofty expectations many once had for the product. When it debuted, the iPad shattered sales records, becoming both Apple's fastest selling product and the fastest selling consumer electronic of all time.

Projecting that rapid growth out indefinitely, analysts argued that the iPad was destined to -- one day -- become Apple's best-selling product. My colleague Evan Niu, for example, predicted that the " iPad would eventually displace the iPhone " -- he wasn't alone.

That may happen (anything is possible) but certainly not any time soon. The iPad's decline last quarter was a not one-off event, but rather the continuation of a disturbing trend -- iPad sales have been falling for more than a year.

Taking over a shrinking market

Apple's Mac, in contrast, has been growing at a rapid pace. Not only did unit sales grow 21% on an annual basis, but also 25% sequentially. As a percentage of the larger PC market, Mac market share has grown in 33 of the last 34 quarters. This is even more impressive in light of the larger trends affecting that market: PC shipments dropped 9.8% last year, and research firm IDC believes more declines are forthcoming.

With more than 300 million PCs shipped each year -- compared to 5.52 million Macs last quarter -- Apple's expensive PCs remain a niche offering. Still, it's not unfathomable to expect Mac demand to continue growing. As mobile devices cannibalize PC sales, remaining buyers could skew more toward the high-end. At the same time, Apple has been working to reduce the cost of Mac ownership, steadily cutting the price of its entry-level Macs and promising free software and regular operating system updates.

Most significantly, the latest version of Apple's Mac operating system -- OS X Yosemite -- includes features that allow it to work interchangeably with the iPhone . Like the Mac, that business continues to grow (up 16% last quarter) and iPhone owners could eventually be converted to Mac buyers.

Projections are dangerous

It's probably a mistake to project that the Mac's rapid growth and iPad's steady decline will continue indefinitely. Apple's management has consistently argued that the recent drop in iPad sales was a temporary set-back rather than a permanent decline, and that the market for its tablets would eventually rebound.

Apple's latest iPads are objectively better than their predecessors, yet they don't offer any major new features. A l ong rumored iPad Pro , however, could shake up the market, and may even cannibalize some sales of Apple's lower-end Macs.

But the very notion that the Mac could eventually overtake the iPad in unit sales is testament to both businesses' current predicaments: The iPad's poor results are equally as incredible as the Mac's recent growth.

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The article Apple's iPad Could be Overtaken by the Mac in Just Three Years originally appeared on Fool.com.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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