iPad Sales Could Fall Below Expectations, Says Wedge Partners

The world's most popular tablet sold three million units at launch. But its success could be short lived. That's according reports that Wedge Partners has released a negative report on Apple AAPL, stating that the iPad sales may not be as high as expectations and that March sales could ultimately disappoint. How is this possible when Apple CEO Tim Cook just announced that the new device had broken all previous sales records? Simple: you have to look at the overall sales figures. Last week, the media happily reported that the new iPad, AKA the “iPad 3,” had sold three million units. When most people heard this news, they naturally envisioned long lines at Apple Stores all across America. But the iPad wasn't sold exclusively in one nation; it arrived in several other countries on the same day that it was released in the United States. In the U.S., many bloggers have noted that the lines at Apple's primary New York locations were enormous. This is not at all surprising. Flagship stores tend to draw big crowds, regardless of the product being sold. Anyone out there remember the Metreon, a San Francisco entertainment complex from Sony SNE? It was a financial disaster. But up until the day it closed (and transformed into a farmer's market before being gutted and turned into something else), the Metreon drew huge crowds for major game and console releases – crowds that were much larger than those at other retailers throughout the country. Thus, people shouldn't be surprised by how well the iPad sold at the larger (and more famous) Apple Store locations. At most U.S. retailers, however, the lines for the new iPad were relatively small. In visiting one of the more popular Apple Stores in Metro Detroit, I expected to see a crowd that was on par with the iPhone 4S. Instead, I saw roughly 50 people and an overabundance of iPad units. This was good news for Bob Consumer who couldn't take off work to wait in line. With literally dozens (perhaps hundreds) of units in stock, Bob could drop by after work and get one with ease. But it was a bit troubling for Apple, a company that was used to selling every iPad it shipped. Never one to show any fear, Apple put on a happy face and let its CEO announce that the device had broken records without actually providing any data. Then, after the media took note of this lack of data, Apple revealed that it had sold three million iPads. The Mac maker failed to provide any more specifics beyond that. Worldwide, I'm betting that the iPad is indeed a record-breaking device. But in America, it seems as if the iPad hype is beginning to die out. That doesn't mean that Apple can't still announce a record-breaking figure. In fact, without any specific sales data for the iPad 1 or the iPad 2, we really can't say what a record-breaking figure would be in America. Whereas the current iPad shipped with a near-endless number of units, the iPad 2 shipped in very limited quantities. Thus, it wouldn't be that hard for the current iPad to sell faster (initially) than the iPad 2 simply because there are more units available to sell. This could allow Apple to post record-breaking results even if the overall demand is lower. Long-term, however, it seems as if Apple might be faced with some challenges. It can use Siri to get people to upgrade their phones, and build thinner, lighter and more durable MacBook Airs to get us to scrap our old, clunky and dying laptops. But while the new iPad is a great device, it failed to dethrone the iPad 2, which is still a very good tablet. And since millions of consumers already have an iPad 2, what is the incentive to buy a new one? This, however, might not be a problem that's specific to Apple. Whereas my initial assumption was that the tablet market was still new enough and large enough to sustain another year of massive iPad sales, it is possible that the market has already peaked. If that's the case, Apple, Microsoft MSFT, Google GOOG and anyone else planning to launch a tablet will have to work extra hard to win over consumers. Follow me @LouisBedigian