Apple Releases Latest, Thinnest iPads as the Tablet Market Shrinks

New iPad Air Features Apple Pay, Which Launches On Monday

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On Thursday, Apple unveiled the latest generation of tablets in what has become an October ritual for the company. Both new devices -- the iPad Air 2 and the iPad mini 3 -- will feature Touch ID, the company's fingerprint sensor, and Apple Pay, its new mobile payment system.

Apple Pay will be accepted at participating retailers starting on Monday, Tim Cook, Apple's CEO, said.

"As you look around, the iPad is everywhere," Mr. Cook said. "We have sold more iPads in the first four years than any product in our history. We've sold 225 million iPads." Mr. Cook then introduced the new iPad Air 2, a device 18% thinner than the original model. "Look how thin it is! Can you even see it?" he asked. He then turned the stage over to CMO Phil Schiller.

The iPad Air 2 is priced at $499 and the iPad mini 3 at $299. Apple said it is dropping the iPad mini 2 to $249. "That means our new line-up has the lowest price points for iPads ever," Mr. Schiller said. Both devices will be available for pre-ordering on Friday.

Mr. Schiller touted the devices' new retina display, as well as its photo, video and app capabilities.

But he did not address rampant concerns about the tablet market.

The iPad is facing an identity crisis. It does not seem to be on the track of the iPod, rendered obsolete by the iPhone -- iPads still generate massive revenue. But the device suffers from the same market squeeze all other tablets face. At their left flank, smartphones -- including Apple's latest iPhones -- are growing more powerful and larger. At the other, laptops and PCs are becoming leaner and more portable -- in short, more tablet-like. Analysts expect both to continue to eat into the sales of iPad and its peers.

Yesterday, Gartner released a report revealing a sharp curtail in tablet sales, as consumers turn to other devices. In 2013, global sales rose by 55%. This year, the research firm estimates sales will see growth, but only 11%, representing under a tenth of all electronics devices.

Apple has not been immune. In the third quarter, the company posted annual declines in iPad revenue (7.6%) and shipments (9.2%). As of the second quarter, Apple claims 14% of the PC, laptop and tablet market, according to research firm Canalys. In tablets, Apple is trailed closely by Samsung.

Both companies are threatened by rising challengers that sell cheaper tablets, with computing power approaching the premium iPad. The fastest growing threat to Apple's share comes from low-cost, Android devices, said Canalys analyst Daniel Matte.

Still, Apple can sit comfortably on profit margins. Despite the slowdown in iPad sales, the device generated $5.9 billion in revenue in the latest quarter. (Lenovo, the globe's top PC-maker and a rising tablet manufacturer, posted $10.4 billion in overall revenue.)

Apple has steadily turned to education and enterprise to boost tablet growth. It has cut deals to bring iPads into schools, with some pitfalls. In July, the company inked a deal with its former rival IBM to build business apps and expand Apple devices across corporate campuses. The partnership was not mentioned on Thursday.

Mr. Matte said the impact of the arrangement on Apple's financial outlook is unclear. "It's still really early," he said.

In the world of Apple's marketing, the iPad is a shrinking presence.

In 2010, its inaugural year, Apple spent $150 million in measured media for the device, according to figures from Kantar Media. That rose to $241 million in 2011. In the following two years, Apple poured ad dollars into the fourth quarters after the October launches of the iPad Mini and iPad Air, but its overall product spending waned, falling to $100 million in 2013.

When the iPad arrived, it titillated marketers. Its portable, large screen -- coupled with iAd, the premium ad network launched shortly after -- gave high hopes for lavish, rich-media digital creative advertising.

Those hopes were dashed. Digital magazines failed to live up to expectations. And iAd has nearly disappeared. After its recent iPhone launch, Apple has publicly distanced itself from Google, noting its disinterest in collecting and sharing consumer data. "It's easy and secure, and yes, it's private," Mr. Cook reiterated on Thursday.

Yet advertisers claim iPads are still worthwhile vehicles, particularly with the introduction of Touch ID and Apple Pay. The features are designed for retail, but ad agencies hope they will accelerate the product's use as a shopping tool. "It's a great commerce device," said Craig Elimeliah, senior VP and director of creative technology at RAPP, an Omnicom agency. "It's very lean-back, sit on your living room couch and shop away."

When Mr. Schiller introduced the new iPad feature, he said, "It's going to be the best way to shop online."

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CORRECTION: An earlier version of this story said the iPad Air 2 retailed for $399. The price is $499.

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