Crunch Time for Apple's iPad

By Markets Fool.com

Last fall, when Apple introduced the 12.9-inch iPad Pro and the 7.9-inch iPad Mini 4, it failed to update the 9.7-inch version of its popular tablet line.

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Apple is finally releasing a new 9.7-inch iPad. Image source: Apple.

On Monday, Apple finally announced its newest 9.7-inch iPad, which will also be called the iPad Pro and will have features similar to its larger sibling. Apple marketing chief Phil Schiller described it as the "ultimate upgrade for existing iPad users" at the launch event. Indeed, the new 9.7-inch iPad Pro may represent Apple's best chance to reinvigorate iPad sales.

Apple needed a new 9.7-inch iPad
Apple has broadened its iPad lineup in the past few years, yet the classic 9.7-inch screen size remains by far the most popular among iPad users. Nearly 70% of total iPad usage still comes from 9.7-inch models, according to Fiksu.

As a result, the lack of an iPad Air 3 had a depressing effect on iPad sales last quarter. iPad unit sales fell 25% year over year to 16.1 million. That was nearly 10 million units below Apple's peak holiday-quarter iPad sales total of 26 million from just two years earlier.

If Apple experiences a similar 25% decline during the current quarter, it would post its lowest quarterly iPad sales total since 2011. While Apple has fresh products for the 7.9-inch and 12.9-inch iPad form factors, it clearly needs an upgraded 9.7-inch iPad to get sales back on track.

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The iPad Pro is a big upgrade over its predecessor
The 9.7-inch iPad Pro offers big improvements over the iPad Air 2. First, its A9X processor delivers 1.8 times higher CPU performance and twice the graphics performance of the A8X chip found in the iPad Air 2. Independent tests have verified the A9X chip's extremely high performance.

The iPad Air 2 is much less powerful than the new iPad Pro. Image source: Apple.

Second, the display is 25% brighter and 40% less reflective than the iPad Air 2 display. It also incorporates Apple's new True Tone display technology that adjusts contrast based on ambient light. These features should make it a lot easier to read on an iPad.

Apple has also improved the front and rear cameras and replaced the two-speaker audio system with a significantly more powerful four-speaker system. Finally, the 9.7-inch iPad Pro will be compatible with the new Apple Pencil stylus and will have an optional Smart Keyboard cover.

The optional stylus and keyboard could help Apple sell the smaller iPad Pro to businesses that need the extra functionality those accessories provide. Apple is in the midst of a big push to sell more iPads to enterprise customers. That was one of the major reasons why it developed the larger iPad Pro. Now it will be able to offer potential customers two size options with roughly equivalent performance.

Upgrade time?
The 9.7-inch iPad Pro thus offers some major improvements relative to the iPad Air 2. But iPad Air 2 users aren't the main target market for this new iPad.

Instead, Apple's biggest opportunity is the large pool of customers using older iPads. There are likely 80 million to 100 million pre-iPad Air devices still in use. Most of these iPads are 3 to 5 years old, making them ripe for replacement.

The new iPad Pro offers exponential performance improvements over these older devices, which are multiple generations behind the iPad Air 2. It is also significantly lighter, weighing in at less than a pound, compared to nearly 1.5 pounds for some of the older models.

Thus, there are a lot of reasons for people to upgrade their older iPads to the new 9.7-inch iPad Pro. As a result, I expect the iPad product line to return to strong growth in Apple's upcoming third fiscal quarter.

But if the new iPad Pro isn't enough to entice users to upgrade their older iPads, then perhaps the market really has moved beyond tablets. Either way, we will probably learn a lot during the next year about the iPad's future prospects.

The article Crunch Time for Apple's iPad originally appeared on Fool.com.

Adam Levine-Weinberg is long January 2017 $85 calls on Apple. The Motley Fool owns shares of and recommends 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.