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3Q review: The iPad adds over $700 million of operating profit with an average selling price of $662

Jul 31, ’10 12:44 PM

The iPad units numbers were not a surprise (except perhaps to some of the professional analysts who do not read Apple’s press releases). Among the more accurate (amateur) analysts, the range was from 3.2 to 3.45 million with an average of 3.32.  My estimate of 3.3 million was the mode of the distribution.

Apple sold 3.270 million in the first ever quarter.  The ASP came in at $662.39, below my expected $700 but higher than the iPhone.

The only unknown is the gross margin.  Given the overall GM and the other products’ margins, I am backing out a 33% margin for the quarter.  I had expected 40% but the lower margin may be a result of launch quarter issues (shipping and allocation of stock) and perhaps a lower target margin for the product.  It should be noted that the iPad margin sits between the Mac and iPod (around 30%) and the iPhone (around 60%).  The iPad is a new category that sits between the Mac and iPhone in terms of usage and it seems it sits also half-way in terms of margins.  Going forward, I’m still modeling a 40% GM for the iPad.

Overall, I estimate the iPad added $717 million of operating profit to Apple’s bottom line. Not bad for a product that was almost universally panned on launch day.

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iPad’s incredible demand

Jul 16, ’10 9:47 AM

The fact that the number of people planning to buy is more than 70 percent of those who have already bought is a good sign for a device that sells for at least $499, said Britt Beemer, America’s Research Group founder. “That shows incredible demand for the product.”

via Still plenty of demand for iPad: survey | Reuters.

And this says nothing of demand outside the US, which, in my opinion, is even higher.

The contrast between this “incredible demand” and the “incredible derision” with which the product was met by the technology media speaks volumes of the disconnect between the market’s most demanding and most vocal customers and the silent vast majority.

See also: asymco:ipad

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Apple’s supply problem

Jun 29, ’10 6:58 PM

With the iPad still unavailable three months after its launch and with only 1.7 million iPhones available for purchase in the first three days, Apple’s inability to meet demand is surfacing as its most immediate and glaring problem. This problem merits the deployment of some of the cash Apple is hoarding.

As I wrote in May, Apple’s next billion users are in waiting. However, to serve them in a timely manner requires a new approach to product launch and ramps.

Apple has imposed upon itself a yearly product cycle for the iPhone and the iPod [and, probably for the iPad].  This is a brilliant move because it keeps the product fresh without having it seem disposable.  It also keeps competitors within its turning radius. However, the challenge is that the distribution network has to be filled rapidly and drained rapidly to maximize availability. This gets harder and harder as the volume grows. Imagine having to manufacture and ship into the channel a billion devices in less than a quarter.

This year’s iPhone 4 launch was heavily over-subscribed.  If Apple had enough supply, launch sales could have gone as high as 2.5 million, one analyst believes. Apple admitted mis-diagnosing demand and problems arose during the reservation process. There were insufficient units for pre-order, never mind for users walking into stores.  The shocking thing is that three months on, the iPad is still unavailable to impulse buyers who might want to pick one up with their iPhone.  This despite the fact that most of the world does not have any purchase option.

Now I ask what will happen next year?  Supply may balance with demand by October and strains will show again around Christmas.  Then what?  The iPhone 5 will be getting prepared with another 50% to 100% growth in demand.  How will June 2011 and June 2012 look?  Will Apple have 4x the supply of iPhones and iPads needed to maintain growth?

There are various solutions possible, but if Apple wants to maintain the product cycle, the event marketing and the “reveal” that builds brand value, it needs to change the way it manufactures.  By investing in automation, locating plants near to buyers and by integrating suppliers into production, it can get the quantum leap in supply it needs.  These are capital-intensive solutions, but Apple’s capital is underemployed.  I see no better use for the rapidly-building cash pile.

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iPad still sold out three months post-launch

Jun 29, ’10 5:05 PM

With the recent iPhone 4 launch the media spotlight has faded on the iPad.  However, the iPad is still missing in action at many (most? all?) Apple stores.  I called four stores in the Boston area and they are only available by reservation.  The waiting time varies but I’ve been told to expect one week wait at one store and an indeterminate wait at the others.

The online store shows 7 to 10 business days waiting time for all models.

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Deagol: iPad web usage 20x iPod

Jun 4, ’10 7:24 AM

So my prediction from six and a half weeks ago came through, with a couple of days to spare. iPad has surpassed iPod in web traffic. It took only two months and two million units, compared to almost 3 years and about 40 million iPod touches out there. That means iPads use the web roughly 20 times as much as iPod touches.

Also, not only has iPad more than doubled Android 2.1′s share, it’s now past all Android OS’s combined. .

via Deagol’s AAPL Model: iPad web usage passes iPod.

Good call.

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