Tablet may be worth $2.8 billion in year one, says analyst
updated 11:05 am EST, Fri January 22, 2010
$500-700 pricetag expected
As a "base case," Apple could sell 5 million tablets in the product's first year, generating $2.8 billion in revenue, according to RBC Capital Markets' Mike Abramsky. The analyst's scenario assumes a $600 retail cost, and a 30 percent gross margin; given this, however, the tablet could add 30 cents to EPS, and by extension an extra $5 to $10 per share in valuation. The figures also operate on a vision of a middle-of-the-road product, more than a niche device but not fantastically successful.
A niche situation would potentially see the tablet costing $800, and selling only a million units. Apple would earn only $777 million in revenue, albeit still adding 12 cents to GAAP EPS. A $500 pricetag could make the tablet a "hit," says Abramsky, selling as many as 10 million units. Even with a diminished 29 percent gross margin, Apple would take in $4.2 billion in revenue and produce 42 cents in EPS.
"Anticipation for an Apple Tablet resembles that of Moses bringing down the 10 Commandments," the analyst comments. "Despite high expectations, we believe Apple plans to redefine portable computing -- as the Mac redefined the PC -- by 'creating' desire for a new converged portable device with innovative touch/gestures -- with iTunes content. A 'Hit' could provide a possible new growth engine for Apple."
The actual price of the tablet is predicted to be $500 to $700 without a subsidy, or as low as $200 to $300 if it is subsidized by a phone carrier. Versions with and without 3G broadband will probably be released, says Abramksy, though both should at least have Wi-Fi. Should the unsubsidized cost reach closer to $1,000, the device is not expected to become popular without carrier help.
It is suggested that the tablet could cut into the current netbook market, if also cannibalizing between 2 to 5 percent of Mac and iPod touch buyers. It is unlikely to make an impact on most Mac owners, as the tablet is not forecast to be Mac OS X- or Windows-compatible. Most reports have called on it to use some variant of the iPhone 4.0 firmware, and consequently run locked-down iPhone apps.
Fresh-Faced Recruit
Joined: Jul 2008
Analyst thoughts
More than likely this is how most analysts analyze new Apple products as far as dollar value to everyone is concerned. Often the product produces different results. People complain that item X is not exactly what they want. The news media gets involved and actively looks for stories which speculate even further, run down, or scare potential buyers.
If Apple did EVERYTHING these freakazoids wanted, the product would be very expensive and therefore justify the remark about how expensive Apple stuff is. What makes Apple different from other PC producers and electronic gizmo makers is their "core buyers."
Apple's secrecy probably also insulates them from getting off track and trying to keep up with all the speculation.
Myself, I envision something really useful of a portable nature and applicable to many, many uses without any or many preconceived notions as to what that might be. Enjoy life.