Why an iPad Pro Makes Sense

Apple (NASDAQ: AAPL  ) could launch a 12-inch iPad Pro in fall 2014, according to Evercore Partners analyst Patrick Wang (via Apple Insider). The goal? Apple would aim to fundamentally disrupt the laptop market, Wang said. Though Microsoft's massive $900 million writedown to its tablet division on Surface inventory elicits skepticism toward such a move, there are still a number of good reasons that Wang could be correct.

Apple introduces the A7 at the 2013 iPhone event. Source: Screenshot from Apple video.Got it

A purposeful move to 64-bit
Taking chip makers by surprise in fall 2013, Apple announced a move to a 64-bit ARM  (NASDAQ: ARMH  ) architecture in its new A7 system-on-a-chip. The 64-bit ARM architecture powered the A7 processor that was found in both the iPhone 5s and the iPad Air.

Though the jump to 64-bit wouldn't provide many immediate benefits to the consumer, since Apple's iPad Air only sports 1 GB of RAM, it did put Apple in a position to build a platform with developers for future apps that use the 64-bit architecture. Important for Wang's prediction, it sets the foundation for an iPad Pro -- a device that could potentially sport the RAM necessary to benefit from the 64-bit processor. The 64-bit architecture introduced in Apple's A7 SoC is a "game changer," Wang argued.

The benefits of 64-bit architecture don't stop there. There's also meaningful cost savings. The MacBook Air's Intel processor accounts for approximately 22% of the laptop's bill of materials, Wang explained. In contrast, Apple's A7 processor in Apple's 128 GB iPad Air represents just 4% of Apple's costs. Cannibalizing its own notebook sales might make sense, therefore, if it helps Apple divest away from its heavy reliance on Intel (which would in turn put pressure on Intel to offer more competitive pricing).

Not just a larger iPad
A few extra inches of display (and nothing else) wouldn't likely provide a compelling enough reason for customers to adopt the tablet in masses. But that's not what Wang is predicting Apple will launch. The iPad Pro, he said, will be more than a marginal upgrade.

Beyond a move to internals that actually take advantage of 64-bit architecture, Wang predicted that Apple will use "the additional screen real estate to create a hybrid-style device that could serve as both a tablet and a notebook, and would make the iPad lineup more appealing to business customers," said Apple Insider writer Neil Hughes. This intersection of laptops and tablets if often referred to as convertibles.

Not the first prediction
Wang isn't the only analyst predicting Apple will launch a larger iPad in 2014. NPD DisplaySearch also predicted  Apple would launch a larger iPad in 2014, based on its supply chain research. The Korea Times has also said that a "first-tier" Apple display supplier in Korea is already producing 12.9-inch Retina displays to be used in the new iPad, for a launch in 2014.

While investors have good reason to be skeptical about both these rumors, and the convertible category in general, Wang has made a solid case for the potential of a so-called iPad Pro. Even so, there's no reason to give any rumors or predictions for new product launches enough weight to impact your investment thesis on Apple stock. Not only is Apple known to scratch product plans at the last minute, but even if the company were to launch an iPad Pro, estimating its impact on the bottom line would be extremely difficult, if not impossible.

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Read/Post Comments (11) | Recommend This Article (2)

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  • Report this Comment On January 05, 2014, at 2:10 PM, TTES wrote:

    Any "analyst" worth his salt should have seen this coming as soon as Apple changed OS X to include iBooks and iMaps.

    It shouldn't be a surprise to anyone that Apple's eventually going to have a significantly more unified OS. There will still be iOS and OS X, but their looks and functions will be more similar.

    So eventually you'll be able to use your iPad as a standalone device, and you can also "convert" it to be used as a more full-fledged desktop machine. And you'll be running OS X. But the change (at least cosmetically and functionally) won't be all that different from iOS.

  • Report this Comment On January 06, 2014, at 7:18 AM, H3D wrote:

    "Though the jump to 64-bit wouldn't provide many immediate benefits to the consumer, since Apple's iPad Air only sports 1 GB of RAM"

    Nonsense. Supporting large amounts of RAM is only one reason for longer word length processors. The primary one is processing more data with each instruction.

    You're been reading comments made by Qualcomm's marketing director and failing to note that Qualcomm dissociated themselves from the comment and moved him to chief cloakroom attendant.

  • Report this Comment On January 06, 2014, at 7:26 AM, H3D wrote:

    "The Korea Times has also said that a "first-tier" Apple display supplier in Korea is already producing 12.9-inch Retina displays to be used in the new iPad, for a launch in 2014."

    And why would Korea Times to the "first-tier" supplier know what Apple intended to use the display in? Apple certainly wouldn't tell them.

    Apple already buy 11.6" and 13.3" Retina displays. Does that mean we should expect 3 models of iPad Pro?

  • Report this Comment On January 06, 2014, at 7:28 AM, H3D wrote:

    "Beyond a move to internals that actually take advantage of 64-bit architecture"

    Like what? The internals that would have the most impact are the graphics processor and the memory interface. Those are already both 64 bit interfaces.

  • Report this Comment On January 06, 2014, at 8:46 AM, icekruz7 wrote:

    Any iPad can be pro if u PAY for the required software!!!!

  • Report this Comment On January 06, 2014, at 10:50 AM, 2KP wrote:

    I think the greater challenge for Apple will be in the realm of convincing vertically-aligned software companies who make most if not all of their revenue from businesses to write their applications for iOS.

    Most of these companies have many, many years of Windows x86-based code in production. I work in the energy industry and a small number of our vendors have only now begun to place iOS on their product roadmaps for 2nd half of 2014 (that's to "start" some development). And that development is mostly just UI-related while the back-end components will still run on Windows Server.

    Some have told us they have no current plans for iOS product development and they will only make that decision if their enterprise customers show any interest in it.

    This new ipad will need to support a ton of "non" AirPrint-compliant devices, potentially support smart badges, work seamlessly with LDAP directory services like Active Directory, support Exchange Encrypted Email, provide multi-monitor and mouse support, etc if it hopes to truly take on the "traditional" laptop use cases. The list goes on and on.

    They will need to repair their relationship with enterprises who invested heavily in their XServe products only to see Apple later abandon it. Mid-sized and large corps don't shift hardware and software platforms on-the-fly. Especially in the energy sector where I work. These big companies have hundreds of millions of dollars invested in Windows and Linux on both the desktop and data centers.

    Finally, we use Panasonic Toughbooks in our field environments (engineered and built to withstand the very extreme environments where we operate globally). Is it part of Apple's plan to take on this segment of the laptop market as well?

    As a Mac owner, I wish Apple the best of luck in the enterprise space. I do believe there are very valid workflows where iOS is the right fit.

    Let's hope that Apple hits the nail squarely on the head.

  • Report this Comment On January 06, 2014, at 10:52 AM, 2KP wrote:

    Oops! I forgot one more capability that Apple will want to seriously consider for this new device.

    Multi-Profile support! We have users who work shift-work and they share their laptops, but have separate email accounts and based on their login they have access to different applications in some cases.

  • Report this Comment On January 06, 2014, at 2:21 PM, jojobobo wrote:

    Well said 2KP and I would like to add USB port and memory slot options too. Professionals stores lots of stuff on external/thumb drives and memory cards.

  • Report this Comment On January 06, 2014, at 5:52 PM, donax666 wrote:

    Once again. Microsoft does something and people hate it. Apple does the EXACT SAME THING and people love it...

  • Report this Comment On January 07, 2014, at 8:41 PM, SC7 wrote:

    They should have a way to switch operating systems so that it's in iOS in tablet mode, and OX in notebook mode.

  • Report this Comment On January 08, 2014, at 11:17 AM, 2KP wrote:

    So SC7, there are ways to do this. It's really about how the software is architected.

    There are design patterns like Model-View-Controller whereby all of the code (except for the code on the user interface-side) is shared across platforms.

    One way to do this using MVC is to have the business logic (i.e. Controller) and data access logic (i.e. Model) exist on a back end server and the user interface (i.e. View) runs either within a browser or compiled natively for the client operating system.

    Another way to do this is to use a cross-platform development solution like (www.xamarin.com) or one of the IBM tools, among others and use the MVC pattern such that the Model and Controller logic is shared and compiled along with the View for the specific operating platform.

    Ultimately, it's really up to the software vendors to determine the Return On Investment (ROI) of doing this and to carefully survey their user-base to see what their interests are.

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