Can the iPad3 Hit iPhone Growth Levels?

Make sure to come back to Fool.com this Wednesday as Fool analysts will be hosting a live chat on Apple's unveiling of the next iPad. You'll not only get our perspective on what it means for Apple as an investment, but you can also ask questions about how the tablet affects its suppliers and Apple competitors. So make sure to check back at fool.com at 12:45 p.m. ET / 9:45 a.m. PT to get a chance not only to read about the newest iPad and what it means, but also to chat with our analysts about its impact.

Apple (Nasdaq: AAPL  ) investors eagerly waiting to see the iPad 3's specs on March 7 may be better served listening to how the company plans to ramp up its sales efforts.

Sure, the sleek tablet has been in hot demand, but its unit-shipment performance has lagged behind its older brother, the iPhone. And given that iPad sales contribute roughly 20% of total revenues to Apple, keeping the growth machine humming is a good thing.

Crunching some tasty numbers
iPad shipments are expected to reach an estimated 53 million units by the end of Apple's fiscal year -- or at least that's what Wall Street soothsayers such as Ashok Kumar of Maxim Group are saying. That seems a likely figure, given that Apple shipped 15.4 million iPads during its quarter that included December -- a period when a number of retailers and manufacturers of consumer goods post their strongest sales of the year.

For Apple, shipping 53 million iPads in fiscal 2012 would translate into a 64% increase over its first full year of iPad shipments in fiscal 2011. Not bad, you might say. But consider this: Apple scored a 78% iPhone increase in fiscal 2009, when it shipped 20.7 million of the snazzy smartphone. And in its most recent blowout quarter, Apple posted a staggering 128% increase in iPhone shipments over year-ago figures, when it moved a whopping 37 million units in the first quarter. The iPad, in contrast, generated a 111% increase in shipments during the same period.

What makes those first-quarter figures particularly interesting is that the iPhone is a more mature product line, and typically it's harder for an older item to achieve higher growth rates over a newer product line, like the iPad, which is working from a smaller base of units sold.

Yet investors are seeing stronger unit-shipment growth with the iPhone when comparing the two mobile devices along the same lifecycle. Assuming iPad shipments grow by an additional 20 million next year, similar to the level expected for this fiscal year, that would yield a less-than-sexy annual growth rate of 40% in 2013.

And between now and next year, there are a few issues that could drive that growth rate even lower, regardless of an iPad 3 arrival. That's because competitors are getting smarter at, well, competing.

iPad vs. the others
Although the iPad 2 claimed the lauded title of best tablet at the Mobile World Congress in Barcelona, Spain, Samsung's Galaxy S II beat out the iPhone 4S in the smartphone category, according to a PC Magazine report, which also said the South Korean manufacturer snagged the MWC title of device manufacturer of the year. It's not unfathomable to believe that Samsung will eventually outdo the iPad.

Meanwhile, in the low end of the tablet market, where Apple lacks a presence, Amazon.com (Nasdaq: AMZN  ) has the Kindle Fire and Barnes & Noble (NYSE: BKS  ) offers the Nook Tablet -- each of which have models that retail for $199. That's substantially lower than the iPad's $499 starting price.

While some folks believe it wouldn't be surprising to see Apple bite the bullet and lower its price on the iPad 2 once the new iPad is unveiled on March 7, iPad fence-sitters are likely to turn their backs on Apple if it doesn't come close to rivaling its bookish competitors Amazon and B&N on price.

Add to that mix a potential dark horse this year, as ultrabooks make their debut armed with Windows 8. If these units hit the consumer sweet spot of $500 or less, they may give iPads -- not to mention other tablets -- a run for their money. After all, snapping up a feather-light ultrabook that has a similar weight to an iPad yet comes with more functionality could be a proposition that consumers find hard to beat. According to a PCWorld report, Intel is aiming to deliver a Windows 8 ultrabook later this year that could be priced as low as $699.

Foolish takeaway
While the iPad's growth rate may continue to lag behind the iPhone, investors can take some solace in knowing that it probably has a long way to go before it begins to suffer negative growth numbers, as the pioneering iPod now does. In the meantime, The Motley Fool has compiled a free special report outlining the "3 Hidden Winners of the iPhone, iPad, and Android Revolution." It highlights three hidden component plays that are profiting from the smartphone revolution yet are are off most investors' radars. Download the report now.

Fool contributor Dawn Kawamoto owns no shares in the companies listed. The Motley Fool owns shares of Amazon.com, Intel, and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Intel, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


Read/Post Comments (7) | Recommend This Article (1)

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 March 04, 2012, at 7:55 PM, artlaz wrote:

    What happens if the iPad 3 with LTE 4 G is subsidized by carriers? That's going to change the price/value equation for consumers.

  • Report this Comment On March 04, 2012, at 8:18 PM, ablevy wrote:

    PCmag and most other pundits are comparing a year old ipad with new Android pads. They are comparing Apples and Oranges (sorry)! If Apple is smart and lowers the iPad 2 to $249 they will kick the Nook and Kindles rear end. After all the app store, air play, etc are worth $50.00.

    The ultrabooks are a threat to anyone who wants a real keyboard. In the Android lineup the real threat is Asus with the Transformer line. It combines the best of the tablet features with an outstanding design that gives the user a portable computer and a tablet. Here is where Windows 8 with the right ultrabook design could make some headway.

    The real question is whether Apple can suck it up and imitate the Asus design in an iPad. That would be a machine i would buy.

  • Report this Comment On March 04, 2012, at 9:35 PM, H3D wrote:

    The iPad got to its current total volume in less time than the iPhone took to hit the same volume. The iPad growth curve is therefore already ahead of the iPhone.

  • Report this Comment On March 04, 2012, at 10:45 PM, alboy5 wrote:

    Ipad3 will have a free Apple Cloud, Siri, awesome processor, graphics,phone capabilities, hundred of thousands of apps.

    Fasten your seatbelts stockholders get ready for a ride to the moon.

  • Report this Comment On March 04, 2012, at 10:56 PM, xmmj wrote:

    You have double-speak here:

    "...iPad fence-sitters are likely to turn their backs on Apple if it doesn't come close to rivaling its bookish competitors Amazon and B&N on price.

    Add to that mix a potential dark horse this year, as ultrabooks make their debut armed with Windows 8. If these units hit the ***consumer sweet spot of $500*** or less, they may give iPads -- not to mention other tablets -- a run for their money. ."

    Well - what is the sweet spot? $500 or less?

    The iPad 2 does not have to match the Kindle Fire price. It is by far a superior unit in virtually every measure. Larger, faster, more powerful, more open, more apps...

    IF ultrabooks can match price... that is a real BIG IF! S far they have had a lot of trouble beating the price of the MacBook Air. Any ultrabook at $500 will be a light weight netbook. and those have been replaced by the iPad for good reason.

  • Report this Comment On March 04, 2012, at 11:02 PM, xmmj wrote:

    the value of 53M sales is extremely conservative. If they are doing 15M per quarter than that is 60M. Remember - they were supply constrained from exceeding that number.

    With the 3 coming out this week, there will probably be another surge. I think they will hit almost 75 M in calendar year 2012. Enterprises are buying them like pancakes at a church breakfast.

    Kindle mostly picks up people who would not buy an iPad anyway. And a reduced price #2 wold appeal to many of them. (After all - you can read all Kindle titles and see all Amazon Prime movies on an iPad too.)

  • Report this Comment On March 05, 2012, at 3:53 AM, SpeechRec wrote:

    the Author: "a less-than-sexy annual growth rate of 40% in 2013"

    Almost every other business (and investor) would be thrilled to have 40% unsexy growth!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1799941, ~/Articles/ArticleHandler.aspx, 8/23/2014 1:38:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement