Apple Inc. (AAPL) introduced the much-anticipated Apple tablet computer called the iPad, which will drive the fortunes of the company. Apple is widely recognized as a leading innovator in the consumer electronics market. While the iPhone and the iPod have been tremendously successful, driving growth at Apple, we believe the iPad has the potential to help the company sustain its recent growth momentum.

Apple appears to be riding an impressive wave of successes in its product portfolio. The overall buzz about the company, whether in the mainstream media or on Wall Street, remains very positive. This is evident in trends in the company’s earnings estimates, which have been up following the company’s recent quarterly report. While the iPad is not expected to have an impact on near-term earnings, it nevertheless is a boost to the company’s long-term earnings power.

Estimate Revisions Going Up

One wrinkle in the company’s fiscal first-quarter outperformance was the role of new accounting principles in those impressive numbers. But the company’s results were stellar either way. Nevertheless, those accounting changes did figure into the improved guidance for the fiscal second quarter. The company now expects to earn in the range of $2.06 to $2.18 per share in the fiscal second quarter, up from $1.79 in the year-ago quarter.

We should, however, keep the company’s history of guidance conservatism while looking at their current guidance. And this is evident from recent estimate revisions. The current Zacks Consensus Estimate calls for $2.31 per share in earnings, much above the company’s own expectation. Estimates appear to be up significantly, with 19 of the 40 analysts covering the stock raising second quarter estimates in the last 30 days.

The current Zacks Consensus Estimate for the second quarter of $2.31 is up from $1.76 in the last 7 days alone. If fiscal second-quarter earnings come inline with expectations, they would be up almost 74% from the year-earlier level.

Apple’s fiscal first-quarter results were a record for the company, fueled by strong Mac and iPhone sales. This enabled it to produce a positive earnings surprise of more than 76%. The company has been producing positive earnings surprises in the preceding quarters as well, the with the four-quarter average exceeding 35%.

Overall, Apple’s earnings performance has been way above expectations, and we expect the company to report stronger results in fiscal 2010. On average, 25 out 40 analysts raised their full-year numbers in the last 7 days. With the introduction of the Apple tablet, we believe the company’s long-term growth story becomes more visible.

Taking on Amazon’s Kindle

While the iPad has a lot more functionality than just book reading, it is nevertheless a direct competitor Amazon’s (AMZN) pioneering ebook reader, the Kindle. In fact, Apple CEO Steve Jobs even acknowledged Amazon’s role in pioneering and developing the ebook market. It will be interesting to watch these two major players duke it out in this fledgling market. The company’s aggressive pricing of the product, much below the rumored price levels, points to its seriousness in capturing market share.

While it is way too early to definitely say anything about the evolving landscape of the ebook industry, Apple’s product does offer a lot more functionality, not to mention the company’s iconic flair for design, than Amazon’s Kindle. 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. 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.

iPad includes 12 new apps designed especially for the iPad, and will run almost all of the over 140,000 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. It can also sync with Apple’s Macintosh and Microsoft’s (MSFT) Windows computers.

iPad comes in two versions, one with Wi-Fi and the other with both Wi-Fi and 3G. It also has a battery based on ARM Holdings’ (ARMH) technology that lasts 10 hours and can be used for a month on standby without needing to charge.

Aggressive Pricing to Capture Market Share

Apple’s enormous fan base had hyped this product for weeks, if not months, before its launch yesterday. The prices mentioned in those discussions were significantly above where the company announced them. The iPad is available starting at just $499 for the 16GB model, going up to $599 for the 32GB model.

While the price is below analysts’ expectations of $1000, we still feel it is expensive. This is because the 64GB model will come for $699 and users will be required to buy the higher GB version to get the benefits of higher functionality. The aggressive pricing, with the start-up model at $499, appears to be aimed at Amazon Kindle, whose high-end reader, the Kindle DX, is priced at $489.

The Wi-Fi only version will begin shipping in late March and the 3G version will be available in April via AT&T (T). Two data plans from AT&T in the U.S. were also announced with $14.99 per month for 250 megabytes of data and $29.99 for unlimited data usage.

Aside from Amazon, Apple’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 Apple’s iPad in the second half of 2010. Hewlett-Packard introduced a tablet called the Slate in January. It will interesting to watch the development and competitive dynamics in this new product category among a host of established players in the days and weeks to come.

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