iPad King of the Hill but Average Prices Will Decline

With staggering demand for the iPad, Apple ( AAPL ) is leaving no stone unturned to ensure smooth functioning of its supply chain. It is absorbing overhead costs caused by the Japan earthquake and originally lowered its prices for the first iPad when the iPad 2 was announced. We believe these moves will help Apple fend off competition from Research in Motion's (NASDAQ:RIMM) PlayBook, and Google's (NASDAQ:GOOG) Android based tablets like Samsung's Galaxy, Motorola Mobility's (NYSE:MMI) Xoom, and Dell ( DELL ) Streak.

While these steps could impact iPad's profit margin over time, robust demand for the iPad and Apple's ability to satisfactorily meet the growing demand could comfortably compensate for the margin decline.

We estimate iPad's gross profit margin will lower gradually decrease to 23% by the end of our forecast period from the current 29%.? Trefis members, however, predict a smaller decline reaching just under 28%, implying slight upside to our price estimate. The marginal impact on Apple's stock is because iPad forms only around 7% of the stock value by our analysis currently.

We currently have a Trefis price estimate of $430 for Apple's stock , about 30% above the current market price.

Higher Sales Can Offset Margin Decline

We estimate Apple's average iPad pricing to be $585 per device in 2011 as Apple slashes prices for older versions of the iPad. Apple cut pricing of the lowest version of the iPad from $499 to $399 after it launched iPad 2 in March 2011. This means that Apple is willing to cut its prices in order to boost sales and maintain its market share against tablets like Motorola's Xoom and RIM's Playbook. This strategy is paying off as the demand for Apple's iPad is still staggering and the company expects to double its sales in the next quarter. (See iPad Continues to Dominate the Tablet Market ) We earlier discussed how Apple's step to absorb additional costs incurred from supply constraints caused by the Japan earthquake will ensure smoother iPad shipments.

According to IDC, of the 18 million tablets shipped in 2010, iPad owned about 83% of the market. With a wide variety of apps to choose from and the best-in-the-lot user interface, we expect iPad sales will cross 54 million by the end of our forecast period.

However, recurring hikes in manufacturing, distribution and labor costs could affect iPad's profitability. In a recent note, we pointed out how shortage of both labor and material at Foxconn Electronics (one of Apple's key suppliers) plant in China, could slow Apple's growth. (See Supply Chain Issues Resurface for Apple) Given the heavy backlog for the iPad, supply chain-related concerns as the above could further delay shipments in the coming quarters, causing a drag on iPad's sales and profits.

Here is our complete analysis for Apple.

Editorial Note: Our original post suggested iPad ASP are currently declining. We clarified that we expect ASP to decline over time.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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Gazelle opens iPad web store, sells iPads at quite reasonable prices

 

Gazelle, an online store that buys and sells recycled and used electronics, was buying up iPads like crazy when the?iPad 2 was released in the beginning of March. Users who wanted the new model were looking for a way to make some money back from their old iPad before they bought the shiny, new tablet. iPads found their way to Gazelle and now the company has launched an iPad-only site, gazelleipads.com, to sell the original models to consumers. From the looks of it, the prices will be hard to beat.

When we reported on Gazelle buying up iPads in March, the store was offering sellers $300 for the 16GB WiFi version, and $530 for the 64GB WiFI + 3G version. As we pointed out then, getting $300 for a one-year-old iPad that you paid $500 for is not too shabby.

Gazelle opened its pilot program Monday and has started selling previously-owned iPads, which it claims are in “superb cosmetic condition.”?This means that screen is immaculate, and besides a few tiny scratches on the body, which Gazelle calls “signs of wear from normal handling,” the iPad will come in its original box with a charger, USB cable, and an instruction manual. The 3G models use AT&T service.

 

As you can see from the prices above, buying an iPad from Gazelle will save you a good amount. If you buy the Apple iPad 64GB WiFi +3G model from Gazelle, you’ll be paying $479.99, whereas you’ll be paying $829 for a WiFi + 3G 64GB iPad 2 from the Apple Store. Of course you’ll miss out on the new components and the slim design, but it’s still a very capable tablet.

At the iPad 2′s launch, Gazelle became the site many people flocked to to sell the technology instead of heading over to sites like eBay or Craigslist simply due to the site’s ease. Selling items on eBay and Craigslist takes work. You have to communicate back and forth with the potential buyer, ship it and deal with PayPal (eBay), or meet a stranger (Craigslist) which is always a risky undertaking.

If you sold your iPad back in March to Gazelle, you were smart to do so when the demand was high. Selling it now will still give you a decent amount back, but the 16GB WiFi version that was selling for $300 in March is now selling for just $203. The 64GB WiFi +3G version that was selling for $500 in March is now offering $340.

May this be a lesson to all iPad 2 owners who will be jumping at the chance to buy an iPad 3. Sell your iPad 2 as soon as you can after the iPad 3 is announced to ensure you get the most money.

http://seeebook.com/

Android Tablets Undercutting IPad Prices

In an effort to attract buyers away from Apple's iPad, device makers are setting starting prices of Android tablets to undercut iPad's US$499 entry-level price.

The starting prices for tablets with 10.1-inch screens from ViewSonic, Asustek and Acer range from $279 to $449. The tablets run different versions of Google's Android OS, include 10.1-inch displays, run on dual-core ARM processors and are Flash-capable.

Apple first shipped the iPad in April last year, and set the tone for the market with its aggressive starting price. The first Android tablets such as the Samsung Galaxy Tab that starting shipping later in the year were overpriced, and the low pricing of new tablets could be a market correction, said Roger Kay, president of Endpoint Technologies Associates.

A ViewSonic GTablet, originally priced at $499, is now available on Amazon.com for $279.99. Acer's Iconia A500 Tab is priced starting at $449 and will ship later this month. The starting price for Asus' upcoming Eee Pad Transformer was listed at $399.99 on Best Buy's website, but the page has now been removed.

According to an IDC survey, 10.1 million media tablets shipped during the fourth quarter of 2010, of which Apple's iPad had a 73 percent market share. In second place was Samsung's Galaxy Tab, with 17 percent market share, while "regional players" captured the rest of the market.

Apple dominates the tablet market because of iPad's aggressive pricing, design and features, Kay said. By comparison, high prices and lack of a cohesive software stack have made Android tablets relatively less attractive to buyers.

"The Android system lacks the total ecosystem and unification that Apple has," Kay said.

Samsung's Galaxy Tab, which comes with a 7-inch screen, originally went on sale late last year through Verizon starting at $600 without a contract and was considered overpriced. Earlier this month, Verizon cut the starting price of Galaxy Tab to $500.

But not all Android tablet vendors have changed their pricing strategy. Motorola continues to offer its Xoom tablet from $599. Buyers can acquire Android tablets from wireless carriers for low prices, but typically have to sign a two-year mobile service agreement.

Buyers typically have a short attention span and could reconsider feature-rich Android tablets at lower prices, Kay said. But it remains to be seen if Android tablets will shake the iPad's market dominance.

Apple in March started shipping the iPad 2. There is currently a two- to three-week waiting period for iPad 2 online orders.

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Cool iPad Cases and Covers For Good Prices

The iPad is said to be the best device you can possibly use to surf the net. Surf the net, view your favourite photos, watch exciting videos and much more with this astounding device. Are you thinking of buying the Apple iPad soon? Well then I think you shouldn't hesitate and also buy an iPad case.

Basically your iPad case will make it easier for you to protect your main device. Although this is true the iPad cover may also be able to improve the usability of your iPad in various ways.

It will of course be up to you to decide which design you will choose for the case and cover of your iPad. What will the best iPad case be for you? The iPad is not yet available, yet thousands of designs for cases and covers have already been made for this new apple product. Decide what colour you want your case to have, and what design. This is not all! Not at all! Due to the many hot apple iPad accessories available you will also be able to choose the material out of which your accessory will be made. Anything from wood to titanium. Maybe an interesting plastic? Flexible rubber? Or maybe aluminium? What will it be?

Some designs might also allow the user to exploit their iPad further. The best iPad covers can make the iPad become a perfect eBook reader through intelligent design. You could even buy two cases. One could be for trips and holidays, while the other for office use.

You may also be interested in very weird designs. Imagine a case in the shape of an airplane, or the case that would scare you to death in the morning because it seems to be a fierce tiger. (Don't worry; weird designs can go very far, actually becoming quite creepy)

Why not buy your iPad accessories as fast as you can? Be sure you want hesitate to buy the iPad itself if it hasn't yet appeared in your country. If you really want your iPad your accessories will be as important as the device itself and will help you use your iPad to its full potential.

You should also not forget to buy some kind of tool to carry your iPad around. It could be a briefcase, or maybe a backpack. Either way have fun surfing with your new iPad!

Check out this post on best iPad cases for a collection of more Apple iPad accessories, covers and protection bags, plus indication to places where you can get the best deals for such products, online.