The iPad's Got a Problem

Apple (Nasdaq: AAPL  ) bulls have dismissed the threats posed by Amazon.com's (Nasdaq: AMZN  ) Kindle Fire.

In their optimistic scenario, Amazon's $199 entry-level tablet simply widens the market the way that Android wireless handsets have expanded the smartphone market. As long as Apple continues to be the one to grow profitably, who cares if Amazon is losing money initially on Kindle Fire sales or that Google (Nasdaq: GOOG  ) is promoting Android as an operating system for free?

Well, at least one analyst is revising his outlook for Apple tablets this holiday season.

Canaccord Genuity's Mike Walkley is out with a new analyst note on Apple that is bullish outside of the iPad 2.

Walkley is reiterating his buy rating and raising his earnings target for the new fiscal year. He also sees Apple selling 30.5 million iPhones this quarter, ahead of his earlier projection calling for 29 million handsets. However, he's also slashing his estimate of iPad units from 14 million to 13 million.

Let's face it, this has been a great quarter to go shopping for a cheap tablet. Hewlett-Packard (NYSE: HPQ  ) cleared out its webOS-based TouchPad tablets for as little as $99. Research In Motion (Nasdaq: RIMM  ) reluctantly slashed its moribund PlayBook tablet. Amazon and Barnes & Noble (NYSE: BKS  ) hit the market with entry-level tablets priced at $199 and $249, respectively.

Last holiday season there weren't too many major tablet companies undercutting Apple on tablet pricing. It's the new fashion statement this quarter.

Consumers also know that Apple has refreshed its iPad product line early in the year. Some are pointing to a March introduction for iPad 3.

I recently argued that Apple was due for a price cut on its tablet. It wouldn't be a shock to see the iPad 3 roll out for less than Apple's historical $499 starting price, though the more logical route for Apple may be to slash iPad 2 prices by $100 or even $200 when the iPad 3 comes out, and continue to market both tablets.

We'll see how this all ultimately plays out. Apple may take comfort in knowing that the HP and RIM price cuts are temporary, but Amazon isn't going to back off its clearly compelling $199 price point and Barnes & Noble isn't going to bow out unless it financially bows out completely.

Your move, Apple.   

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The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for HP. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (11) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2011, at 1:52 PM, stansocha wrote:

    From a entrenched Apple user, lesser tablets will in the long run lead to purchases of iPads. They will wet serious user's appetites and since the iPad is the recognized tablet leader for quality and function these individuals will upgrade in the long run.

  • Report this Comment On December 06, 2011, at 1:57 PM, macgregor54 wrote:

    FUD. Not a real article, just clickbait FUD.

    14 to 13 million hardly qualifies as 'slashing' and it's a random guess from an internet dude whose guesses, I am willing to bet, track the mean of everyone else's guesses.

    Soon, the quarter will be over. The rush to buy a subsidized Amazon tablet will be over, and the iPad will roll out #3 while everyone else is looking up 'tablet' on Wikipedia. We'll have facts, not guesses, and again, Apple will have to deal with the terrible reality that is has more cash and long term investments than the entire revenues of all but the 25 largest companies in the Fortune 500.

    Please, MF, let's have some articles that aren't ' a guy said that another guy guesses that someone thinks maybe O GOD O GOD APPLE IS GOING BROKE O GOD O GOD.' FUD where we don't need it.

  • Report this Comment On December 06, 2011, at 2:00 PM, lucasmonger wrote:

    As an original iPad owner, I tried a demo unit of the Kindle Fire this weekend and concluded that Apple has nothing to worry about. I'd take 1 iPad over 2.5 Kindle Fires any day. It's the rest of the tablet makers who need to be worried. How can they possibly compete with Amazon's price or Apple's ease-of-use/ecosystem.

    Keep the prices where they are at and keep raking in the profits AAPL!!!!

  • Report this Comment On December 06, 2011, at 2:08 PM, 1984macman wrote:

    I urge other posters to join me in boycotting this author by refusing to post to his ridiculous articles. We give him strength by posting even negatives about him. If you do post, then do so only to warn others not to fall into this trap.

  • Report this Comment On December 06, 2011, at 2:35 PM, kariku wrote:

    I agree with the user comments. This article sucks. The whole MF kind of sucks.

    Buying an iPad this month just to prove the opposite.

    Also, short AMZN.

  • Report this Comment On December 06, 2011, at 3:27 PM, SkippyJohnJones wrote:

    @Rick Aristotle Munarriz - OK, here you go again. You turned a valid analyst estimate into clickbait. You could have made your point much more effectively by spending a few minutes researching that several other analysts have recently done the same. Instead, you listed other companies' falures in the tablet space as a concern for Apple.

    Kindle is a legit new player. Nook will be here as long as B&N is. But HP and RIMM aren't exactly laughing all the way to the bank with their tablet strategy. Check a 2 year chart on both companies - UGLY!

    HP spent $1.2 billion on WebOS, and then spent considerable additional money on product development and marketing. The end result was a $100 million write-off to close out the fiasco. The CEO then announce the spin off of the PC division and WebOS, and was subsequently fired. Carly has promised not to sell PC, but has no idea what to do with WebOS.

    RIMM acquired QNX for an undisclosed amount to power the Playbook, and then spent considerable additional money on product development and marketing. The end result was a recently announced $485 million write-off to close out the fiasco. The co-CEOs basically bet the company on the Playbook. Activist investors are circling, and the management likely won't survive much longer.

    -----

    "Last holiday season there weren't too many major tablet companies undercutting Apple on tablet pricing. It's the new fashion statement this quarter."

    Last holiday season, every major CE player was talking up the inevitable success of their copycat devices. Nobody had one at market yet, so there was no chance to liquidate inventories. This year, they have been confirmed as failures. Remember the Xoom? Neither does anyone else.

    The market as it exists today is Apple at the top, Kindle/Nook at the bottom (offering price conscious consumers a valid features tradeoff for $200), and nothing else. The Samsung Tab, the Asus Transformer, and countless others are all bit players. This could change, but we haven't seen any evidence yet to suggest it will. Not only have the middle-ground players lost in 2011, they have done so in a spectacular fashion that left scars as warnings for would-be players.

  • Report this Comment On December 06, 2011, at 5:25 PM, Robayr wrote:

    Rick,

    You are right. This will probably be a great season for a cheap tablet. And that is exactly what you will get. Bet you wouldn't buy a Kindle. Got baited into another one of your articles. About to quit reading these things from MF altogether.

  • Report this Comment On December 07, 2011, at 1:04 AM, kthup wrote:

    It makes me so happy to see so many people finally calling out these irresponsible Motley Idiot writers for the nonsense they post that although I would love to damn them with silence as someone above suggested, I just can't. I have to add that nook tablet is not the "entry level" nook product. Any dimwit doing even a half-assed research job should know that. But you won't find any of these writers doing even that much. They have a limited understanding of the technology and even less of the strategy. They don't understand the businesses they claim to be analyzing.

  • Report this Comment On December 07, 2011, at 10:01 AM, rsmurf wrote:

    I bet you and Michael Dell would make a real pair!

    If i had a nickel for every misleading, uninformed, ridiculous, lame brain, article about apple i would be a milti-trillionaire.

    I'll take my nickel now!

  • Report this Comment On December 14, 2011, at 12:50 PM, gaucho420 wrote:

    My girlfriend owns at Galaxy Tab, the original little one and we are plenty sastisfied with that tablet, which cost us $250. Yes, the Ipad is clearly better and a superior product...but we have no plans, even though we can easily afford one, to pick one up.

    So the purchase of one product does not mean I plan on upgrading to the latest & greatest. I also own PCs, and I KNOW Macs are better...but again due to price and the fact that the PC works good enough, I have no plans on upgrading to a Mac.

    I don't need the #1 product, for every product...sometimes an 8 is all that's needed when the 10 is twice the price.

  • Report this Comment On December 14, 2011, at 12:54 PM, gaucho420 wrote:

    And Jesus, Apple fans are ridiculously blind. Apple is priced to perfection, so a miss by about 1 million units IS a big deal as it screams of what happens when the Galaxy Tab or any other one DOES catch up to the Ipad? You do realize it is INEVITABLE.

    Droid anyone? They clearly have passed up the Iphone in popularity and in being the most coveted smartphone (study after study show the average US consumer now prefers the Droid), why can't it happen to the Ipad?

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