Apple Inc. (AAPL) launched its much-hyped Apple tablet computer called the iPad on April 3 in the U.S. Shares of AAPL surged and had hit a near record high, rising further after hours last Thursday to $236.50. Reviews of the iPad were favorable, with some exceptions.
Features and Availability
The iPad is available only in the U.S. for now and is priced at just $499 for the 16GB model, going up to $599 for the 32GB model and $699 for 64GB (only for the Wi-Fi model).
It has a battery that lasts 10 hours and can be used for a month on standby without needing to charge. iFixit, an Apple parts and repair specialist, said that the iPad includes chips from Samsung Electronics, Broadcom (BRCM) and Texas Instruments (TXN). Moreover, the iPad is available at Apple’s 200+ U.S. retail stores and will also be sold via Best Buy (BBY) stores.
The iPad includes 12 new apps designed especially for the iPad, and will run almost all of the over 150,000 apps in the Apple App Store, including apps purchased for iPhone or iPod touch. iPad syncs with iTunes, just like an iPhone or iPod Touch.
The iPad can be used for web browsing, reading and sending email, viewing photos, watching videos, listening to music, playing games and reading e-books. It has a touch screen and comes with 16, 32 or 64 gigabytes of flash memory storage and built-in Wi-Fi and Bluetooth connectivity. The iPad is neither a netbook nor a laptop but attempts to build in features of both a smartphone and a laptop.
The iPad can be used for reading ebooks, which increases competition for Amazon.com’s (AMZN) Kindle, Sony’s (SNE) e-reader, as well as other e-book readers. The iPad has enhanced video capabilities and large arrays of video games that make up a large percentage of the apps currently available for the iPad. It can use approximately 150,000 existing iPhone apps, as well as new ones currently designed for the iPad.
It includes features such as the high-resolution multi-touch display and is much thinner and lighter than any laptop or netbook available in the market. The iPad’s touchscreen measures 9.7 inches (25 cm). Management said that the iPad is just a half an inch thick and weighs just 1.5 pounds — thinner and lighter than any laptop or netbook.
The other model with both Wi-Fi and 3G will be available via AT&T (T) in late April in the U.S. at a price of $629 for 16GB, $729 for 32GB and $829 for 64GB. Apple said that the iPad will ship in additional countries globally later this year. We believe that the international rollout will help it grow higher revenues.
Our Take on iPad
Since the iPad has a lot more functionality than just book reading, it will be a better alternative to Amazon’s pioneering ebook reader, the Kindle. Aside from Amazon, AAPL’s iPad also poses a threat to Hewlett-Packard (HPQ), Acer and Dell (DELL), who relied much on the growth in netbooks. According to sources, Acer is planning to launch a tablet to compete with AAPL’s iPad in the second half of 2010. Hewlett-Packard introduced a tablet called the Slate in January.
Apple’s CEO Steve Jobs said that the iPad had to be better than a smartphone or laptop at browsing, e-mail, photos, video, music, e-books and games. While the iPad is somewhere between a smartphone and computer, we believe Apple will have to convince users to buy an iPad, when they already own laptops, e-book readers, set-top boxes, smart phones and home broadband connections.
While demand for iPad has been rising due to its large screen, small size and fast Web browser for surfing and multimedia, it lacks a keyboard and cannot be used by people who need computers or laptops for everyday work.
Moreover, it lacks certain features such as the camera and more than one app cannot run on the iPad at a single time. Further, it lacks support for Adobe’s (ADBE) Flash technology, restricting the view of popular video sites that use Adobe’s Flash software.
AAPL may also face production delays and supply constraints due to the huge demand for its iPad. Analyst firm Piper Jaffray estimated that Apple has already sold between 600,000 and 700,000 iPads, up from their forecast of a sale of 200,000 to 300,000 units.
Moreover, AAPL launched only the Wi-Fi models, while the 3G models (expected to be launched at the end of April) will cost $130 more than the corresponding Wi-Fi models with the same storage capacity. Even though with the 3G models users will have the flexibility of using cloud computing functionality, the 64-GB iPad 3G for $829 is quite expensive. This might reduce sales.
In our view, Apple has a loyal customer base and it is historically seen that products launched by Apple are often very successful. We believe that the iPad too has the potential to help AAPL sustain its recent growth momentum and will provide a boost to the company’s long-term earnings power.
Although the iPad has driven a tremendous buzz on Wall Street for quite sometime, the question remains whether the iPad will continue to attract a large number of users in the next few months.
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