“iPad sales met our expectations,” Tim Cook told analysts Tuesday, “but we realize they didn’t meet many of yours.”
That’s a polite way of saying that he knew what was going on, even if most Apple analysts and much of the business press were clueless.
(Business Insider, always happy to stick a knife in Apple and twist it, ran back-to back-headlines: “Apple … Whiffed On iPad Sales Again” and “Only IBM Can Revive Apple’s iPad Sales.”)
By Wednesday morning, Wall Street had come around. Several analysts offered clients their own explanation for why iPad sales seem to have peaked. Here’s Piper Jaffray’s Gene Munster:
“We think there are three reasons for the declines in iPad,” he wrote in a paragraph headed “What’s wrong with the iPad?”
- First, we believe that the majority of tablet market unit growth is coming from the lower end of the market and iPads are priced higher.
- Second, we believe the low hanging fruit in the high-end tablet market has been captured with Apple selling 225 million iPads over the first four years. Tim Cook commented on the earnings call that the adoption of the iPad over the first four years has been better than they were expecting, perhaps suggesting the high end is becoming saturated.
- Lastly, given iPads are not subsidized, the replacement cycles tend to be longer compared to an iPhone.
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IBM’s plan to sell and service enterprise iPads could turn things around, Munster suggests. But he thinks they might get worse before they get better, especially if Apple releases an iPhone this fall with 5.5-inch diagonal screen — big enough to cannibalize iPad sales.
Steve Jobs famously said, “If you don’t cannibalize yourself, someone else will.” And because iPhone profit margins are better than the iPad’s, that’s the kind of cannibalization Jobs would have loved..
UPDATE: According to Jan Dawson, the iPad is generating revenues at a rate of about $30 billion a year, bigger than McDonald’s or Time Warner.
“Excuse me,” writes GigaOm’s Kevin Tofel in Why slowing iPad sales didn’t surprise Apple, “if I don’t shed any tears for Apple’s $30 billion iPad problem.”
Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at fortune.com/ped or subscribe via his RSS feed.
