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Delay for Larger iPad Could be Good for Growth

Features FOXBusiness

Apple (AAPL) is reportedly delaying the production of its larger screen iPad. But the stall isn't all bad: It could help regenerate momentum for long-term growth of the slowing segment.

According to the Wall Street Journal, Apple has instructed suppliers in China to  push production of the larger iPad to later this year because of debates on its hardware features. The company is reportedly considering adding a USB port with technology that would transfer data up to 10 times faster than traditional USB ports. The ports could also connect a keyboard and mouse, making the device a viable laptop replacement. Currently, the iPad and iPad Mini devices do not include USB ports.

The delay comes as iPad sales continue to slide. In the first quarter of 2015, Apple sold 21.4 million units, down 18% year over year. The sales decline caused a 22% drop in revenue.

However, CEO Tim Cook said the iPad has a “bright future” in the long run. On the most recent earnings call, Cook said a large percentage of global iPad sales were to first-time buyers, which pointed to a lower saturation level in most countries.

Plus its enterprise partnership with IBM, which has agreed to sell iPhones and iPads, could give the tablet segment a boost.

“It makes sense for Apple to hold off on this and get it right. If there’s more traditional inputs like a soft keypad or USB input, that’s where you could see traction take hold,” Strategy Analytics senior analyst Eric Smith said.

With worldwide tablet shipments down, Smith believes enterprise sales will account for much of the new growth going forward in tablets.

“Developed markets customers pretty much have [a tablet] at this point if they want it…we’re reaching a replacement market situation rather than fantastic growth in the last few years,” Smith said.

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He added the next big push for vendors like Apple, Lenovo, and any Windows table-makers is likely to be focused on enterprise where margins are better.

The competition will also be fierce. Research from IDC shows Apple’s share of the global tablet market dropped to 28% in the fourth quarter of 2014, compared to 33% a year earlier. Samsung also saw a decline with 14.5% market share, down from 17.2% the prior year. 

Still, overall growth is possible. From point of sale to field work like checking parking meters, there are many ways it makes sense for enterprises to increase overall tablet use.

“Rather than a Microsoft, Samsung or HP eating Apple’s lunch, they would rather have that market to themselves,” Smith said, pointing to the potential iPad delay.

Apple is not commenting on the larger iPad ahead of its much anticipated Apple Watch event next Monday in San Francisco.

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