E-Commerce News: AAPL Financial: iPad Gives the Market a Lot to Mull
Apple (Nasdaq: AAPL) shares picked up a little over US$2 on Tuesday, hitting $196.19 at market close. It was one of many incremental ups and downs AAPL’s seen since shares peaked just before the unveiling of the iPad Jan. 27. The general direction since then, however, has been a slight downward droop.
That perhaps reflects the uncertainty in the market caused by the iPad’s launch and events in its wake.
For starters, Apple CEO Steve Jobs was ebullient in his praise of the iPad, describing it as Apple’s “most advanced technology in a magical and revolutionary device at an unbelievable price.” then on Friday, Retrevo revealed results of a survey indicating most of the respondents the company talked to actually lost interest in the iPad after its announcement. This was followed by a Wall Street Journal report that Apple may consider cutting prices on the iPad to suit market demands.
Investors could dismiss Jobs’ statements as the usual product launch hype, but what should they make of Apple executives’ apparent willingness to cut their prices, especially considering that the company has always been known for sticking to the high end of the market?
Shaking up the Market
Apple, of course, has made a name for itself as a rule-breaker. Who’d have thought the iPhone would be such a phenomenon? Or that people would flock to buy devices in the iPod family?
That being the case, let’s deal with the effects of the iPad launch before looking at the other stuff.
The iPad has shaken up the e-book market, with publishers rising in revolt against the US$9.99 cap Amazon.com (Nasdaq: AMZN) attempted to impose on e-book prices. first Macmillan came out swinging, and after much consternation, Amazon.com eventually agreed to let it set e-book prices as high as $14.99. News Corp. (Nasdaq: NWS), which owns Harper Collins, and the Hachette Book Group will join Macmillan in setting tiered book prices.
Meanwhile, Apple looks to be gearing up to sell online ad space on the iPad. It’s reportedly banned third-party app makers from featuring location-based ads in their wares and filed a patent for a location-based interface that can display ads.
Recall that in January, Apple bought mobile ad company Quattro Wireless. So it’s pretty safe to conclude that Cupertino sees the iPad as generating income over and above that from sales of the device to consumers.
What about the Negatives?
The results of the Retrevo survey kicked off a spate of speculation about the iPad failing to excite consumers.
Retrevo conducted a survey twice: once between Jan. 16 and Jan. 20; and again between Jan. 27 and Feb. 3. The second survey seemed to suggest that people lost interest in the iPad shortly after it was unveiled
It found that 52 percent of respondents said they were not interested in buying an Apple tablet, compared to 26 percent of respondents to the previous survey. The second survey also found that 61 percent of respondents said they didn’t think they needed an Apple tablet, up from 49 percent responding to the first survey.
Both the surveys were conducted online and polled a random sample of more than 1,000 visitors to Retrevo’s Web site.
The Silver Lining
Still, that leaves Apple considerable room to improve its showing. “Around 60 percent of the respondents said they didn’t need a tablet, and the number went up after people found out what the tablet was and how much it was going to cost,” Andrew Eisner, director of content at Retrevo, told MacNewsWorld. “That said, there’s still a pretty significant [number] of respondents who did not say ‘no’ to the iPad. if Apple can sell a million of these, it wouldn’t be a bad thing.”
Indeed, Apple might be able to sell a few more than a million iPads. for example, Barclays Capital’s Ben Reitzes predicted in a research note released Jan. 28 that Apple will ship 2.9 million iPads in fiscal year 2010. In FY 2011, that figure will jump to 7.3 million, Reitzes said. The iPad will add at least $1 in earnings per share to Apple’s prices in the short run, and more than $20 in value to Apple’s shares, he predicted.
Further, it’s not quite clear just what the Retrevo survey means. “I’m skeptical that it means much, simply because no one actually has been able to look at or evaluate real, shipping iPads,” Carl Howe, director of anywhere consumer research, told MacNewsWorld. “You really have to use an iPad to understand its appeal.”
The iPad could energize the emerging tablet PC market, according to In-Stat. It will create a potential semiconductor opportunity of more than $4.1 billion, Jim McGregor, chief technology strategist at In-Stat, told MacNewsWorld.
There are three potential business models for the iPad: selling it as a standalone device like PCs; offering it with content like the iPod and iPhone; or selling it bundled with content and service like Amazon.com’s Kindle, McGregor pointed out. “The third offers a significant opportunity upwards of 50 million units in 2014 and growing strongly,” he said.
Perhaps that’s the option Apple is taking, with its well-publicized efforts to line up newspaper and book publishers to provide content.
What about Macworld?
The Macworld Conference and Expo opens in San Francisco this week, but Apple isn’t attending, and overall attendance and the number of exhibitors is down.
Are people losing interest in Apple? Should investors be worried?
Certainly not, said Brian Marshall, an analyst at Broadpoint Amtech. Consumers haven’t grown out of Apple; Apple’s just grown out of Macworld.
“Apple, with a market cap of $180 billion, is too big for these things,” he explained. “I think they want to control their PR and the events to go to.”
In fact, Apple doesn’t seem to want to attend anyone else’s show. It doesn’t even attend the huge Consumer Electronics Show, which was held January in Las Vegas. “You’d think that, as the world’s largest electronics company, it would go to CES,” he said.
Instead, it appears Apple now only chooses to attend its own parties, and if the iPad show was any indication, it doesn’t seem to have any trouble drawing a crowd.
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