Apple Succeeded With the iPad Air

Apple's iPad Air likely drove mix up within Apple's iPad sales beautifully. What's next?

Mar 10, 2014 at 11:30AM

When the iPad Mini first arrived on the scene, even with its far-inferior specifications to the larger iPad 4, it sold like hotcakes. The market loved the thin and light form factor of the 7.85-inch iPad, despite its shortcomings. For a while, many had simply written off the larger tablet form factor in general -- that is, until Apple (NASDAQ:AAPL) introduced the iPad Air.

The iPad Air changed the game
The Air brought with it all of the design goodness of the iPad Mini, as well as the convenience of a larger screen. In addition, Apple updated the iPad Mini to be thoroughly modern, including the same high-resolution Retina display, the same fast processor, and all at a higher price point commensurate with the steep upgrade. While many found value in the iPad mini with Retina display, it seems that Apple has been successful in pushing customers back to the larger iPad with the iPad Air.

How do we know this? Well according to Ming-Chi Kuo, an analyst with an excellent track record in forecasting Apple's upcoming products, the iPad Mini with Retina display simply hasn't been selling all that well. With iPad shipments hitting record highs, one can only assume that the iPad Air has helped Apple shift its tablet mix from the 7.85-inch models to the 9.7-inch models. Given the $100 price delta between the iPad Mini with Retina display and the iPad Air, it's likely that the Air is significantly more profitable on both raw gross margin dollars per unit and gross margin percentage. This is an unequivocal win for Apple.

What's next?
Each year, Apple will be able to crank up the processing power on these devices, and as display technologies advance, Apple will be able to put even higher-resolution panels on there without sacrificing battery life. Further, Apple will continue to make strides in software on the iPad, and these advancements will drive the need for more processing power, creating a positive feedback loop that keeps the upgrade cycle going.

The tablet market is likely to continue to grow quite nicely, and even with its products positioned at the higher end of the market, Apple should benefit nicely from the secular trends. It is also likely that Apple will defend its high-end share here among consumers while potentially facing difficulties from larger Windows 8.1 devices in corporate/enterprise environments. In short, the iPad is in a good position today for Apple, but the question is whether Apple can drive another jump in revenues with a new product or sub-category, or if it is subject to a more continuous, slower growth curve.

Foolish bottom line
Apple has done a superb job with its tablet offerings and is likely to defend share at the high end of the 7-inch and 8-inch categories, as well as in the 10-inch class devices. While the high end likely will not grow in line with the broader market, the higher end should continue to grow. As Apple owns both the hardware and the software ecosystem, it should be able to continue to compel users to upgrade to the latest, greatest hardware with more demanding and powerful software and services. 

The next big trend in tech is here. Are you set to profit?
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

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