Why an iPad Pro Makes Sense

The argument an iPad Pro just got beefier.

Jan 5, 2014 at 1:00PM

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.

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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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Fool contributor Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 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.

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