iPad Fever: Apple's Engineered-System Tablet Surges in Enterprise

Largely lost amid the bizarre hand-wringing over Apple’s quarterly revenue growth of “only” 23% to $35 billion and its earnings per share of “only” $9.32 was Apple’s contention that iPad sales into corporate world tripled over the year-earlier quarter.


And in a broader scope, the runaway success of the iPad underscores a powerful trend that’s beginning to ripple through the technology industry: the unprecedented levels of performance and user experience that are possible when hardware and software are engineered together.

 
But we’ll get to that in a moment—first, here’s Apple CFO Peter Oppenheimer on the iPad’s success from his prepared remarks during Apple’s earnings call this week:


“iPad continues its rapid adoption within the enterprise. We estimate that the number of iPads in the Fortune 500 has more than tripled in the past year. iPad has become an indispensable tool worldwide to help employees across industries do their jobs more effectively," Oppenheimer said.

“British Airways has incorporated thousands of iPads across their business from customer support at check-in to cabin-service directors replacing paper printouts, to details on customer preferences and providing real-time updates.


“And homebuilder Dialogue House in Japan is actively building smart homes that will be controlled by iPads, and their sales reps are using iPads to show floor plans and upgrade options.” 


Sparked by the strength of those enterprise sales as well as strong demand from the education sector, Apple said it sold a total of 17 million iPads in the quarter (up 84%), and that revenue from sales of iPads and accessories hit a record of $9.2 billion, up 52% over the same quarter a year earlier.


CEO Tim Cook said that while hundreds of competitors have moved into the tablet space, none has come close to capturing the public’s imagination—let alone its revenue—the way the iPad has.


“We re-priced the iPad 2 to $399, and it did very well in the quarter,” Cook said. “The most popular iPad is the new iPad, but iPad 2 did very well. It was particularly a key in the K-12 area that Peter spoke about earlier where we sold about 1 million units for the quarter.”

 
Even in comparison to the remarkable sales ramps of its wildly popular iPhone and iPod products, Apple has entered new territory with the growth of iPad, whose unit sales since its introduction have now topped 84 million.


Cook said iPad hit the 84-million mark in “one-third less time” than the company needed to sell 84 million iPhones, and in half the time Apple took to sell 84 million iPods. Asked if he was concerned about lower-priced competitors, Cook promised Apple would continue to focus on building the best products in the world and creating the best experiences for users.


“We have been very aggressive in the space, and I don’t see changing that in terms of competition. We’ve all seen many different tablets—hundreds of them—come to market over the last few years, and I have yet to see any of them really gain what I would call any level of traction at all.”

One of the keys to Apple’s success with not only the iPad but the company’s entire product line is its unique insistence on engineering both the hardware and the software to optimize them from the ground up.


That’s a strategy also employed by Oracle, and one that CEO Larry Ellison has trumpeted as an enormous source of value for customers, and as an enormous source of competitive advantage for Oracle.

In a recent keynote speech at Oracle OpenWorld Japan, Ellison opened with the following overview of why next-generation systems will require optimized engineering of hardware and software from the ground up:

“What I’d like to talk about is the next generation of computing. In the next generation of computing, we believe you have to be in the hardware business AND in the software business to get the best possible systems,” Ellison said.

“My favorite example of hardware and software engineered to work together is Apple. Apple does a brilliant job of designing all of the pieces: the hardware—all of the hardware—the software, and all of the online Internet services to provide a complete, seamless experience for the customer.
“As a result, Apple has become the most-valuable company on the planet Earth. That is their strategy: hardware and software, engineered to work together. That is also our strategy: we think it changes EVERYTHING if you do both.”

Microsoft has become an engineered-system believer via its new Surface tablet. CEO Steve Ballmer has said that while Microsoft’s hardware partners do a great job for the company, Microsoft feels that for the increasingly sophisticated—and potentially lucrative—tablet market, it needs to control both the hardware and the software.

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