Can Apple right the ship with iPad 5?

The next product due for a refresh is the iPad, and Apple might provide a significant upgrade for tablet users this time around

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After announcing the newest iPhones, Apple  (NASDAQ: AAPL)  shares slipped 10%. The next product due for a refresh is the iPad, and Apple might provide a significant upgrade for tablet users this time around, which I think will send the stock higher.

Righting the ship

Apple reported disappointing iPad sales last quarter with just 14.6 units sold compared to analysts' consensus expectations of 18.1 million and the previous year's 17 million units. While that number disappointed a lot of investors, I don't think it's really anything to worry about.

Last year's number got a boost from the March release of the iPad 3. With no new iPad product out last quarter, there was nothing fresh for consumers to rush into stores for. While competition from other device makers like Samsung and Amazon  (NASDAQ: AMZN)  is getting stronger, the decline in iPad sales is not clearly linked to any significant change in consumers' typical purchasing habits.

Apple is expected to announce an iPad refresh next week at a special media event. The rumoured iPad 5 will likely sport many of the new features present in the iPhone 5S — 64-bit processor, fingerprint scanner. Supply chain sources also inform analysts that a significant form factor change is in the works after four generations of similarly designed devices.

A significant product refresh just in time for the holiday season ought to bolster Apple's typically strong first quarter earnings and could easily make up the 3.5 million iPad deficit from analysts' expectations last quarter.

Still, the company faces significant competition going into the season.

Can't beat this price

Amazon recently announced an upgrade to its Kindle Fire line — the HDX — that offers users similar specs compared to those rumoured in the iPad Mini 2 for US$100 less. Amazon's strategy is clearly different from Apple's in that it tries to make most of its profit from selling content, for which the Kindle line has been very effective. It's long sold a sub-US$200 tablet for a loss. The HDX is the company's first step above the US$200 level (for an entry-level device).

While the company is still expected to take a loss on every HDX device it sells, its willingness to step above the US$200 threshold signals that its making a serious bid to compete with mid-to-high-end tablets. Previous generations of the Kindle Fire have been criticized for feeling as cheap as its price and not offering the best value despite its price. So Amazon is no longer trying to compete on the low-end. It's going after the mid-range market carved out by the iPad mini, and the reviews thus far seem to agree the HDX is a significant upgrade.

Corporate use

Tablets are becoming a larger part of corporate enterprises, and the BYOD, or bring your own device, trend continues to pick up steam putting the purchasing power in the hand of users instead of corporations — who may negotiate deals with manufacturers. With Microsoft  (NASDAQ: MSFT  )  ending support for Windows XP next year, a lot of enterprises may open up to the tablet market.

Both the new iPad and Amazon's Kindle could benefit from that trend, as Microsoft struggles to compete in the tablet market. The HDX offers enterprise focused features such as virtual private networking and encryption. With quad-core processing power and a consumer-friendly price point, it could capture a significant portion of the BYOD market.

The iPad 5 will likely contain the 64-bit A7 processor present in the iPhone 5s. As such, it could spur a new round of enterprise app developments for the iPad utilizing the additional processing power and subsequently take significant share from traditional PCs.

Microsoft hasn't yet caught on with the tablet market, but it's now marketing its Surface 2 as "a tablet for business." The company has even partnered with enterprise software leader SAP to build apps for Windows 8. The Surface 2 certainly offers some promising features, but it may fail to win over the BYOD crowd due to its price — US$449 for RT US$899 for Pro.

Upgrade me

Apple's competition is getting stronger, but the company is likely to stay ahead of the curve with its next iPad iteration. The iPad 5 could see significant changes from previous generations this time around, spurring a significant increase in purchases this holiday season and making up for its sales miss last quarter.

One of the biggest things to watch in the coming months, though, is how tablets like the iPad and Kindle Fire HDX fare in the corporate BYOD market. Microsoft has the most to lose, and I expect it to ramp up its efforts to make partnerships with enterprises and software makers to maintain its dominance in the corporate world.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Adam Levy, originally appeared on fool.com.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »