Analysts on the iPad: It’s a Winner

(By: Sarah Perez)

 
After being saturated with blog posts from every blogger, tech pundit and average Joe about Apple’s newest entry into the tablet PC game, the iPad, we finally decided to seek out the opinions of those who know best (well, sometimes, that is): the tech analysts. Numerous sites have quoted from this analyst or that and a few have even done round-ups of their own, but we never found a comprehensive resource providing all the analyst opinions in one post. So we made our own.
Below, we’ve combined all the analysts’ statements and estimates into one massive read. And after going through everything that’s been said, we discovered that the collective opinion of the analyst industry is that Apple has a definite winner on their hands.

The iPad Will Sell

Thanks to Barrons, we found a round-up of analyst estimates regarding iPad sales. We’ve taken their post and re-listed the quotes below from lowest to highest. The end result? Sales could be anywhere from 1 million to 6 million. No matter what the number, that’s not too shabby.

  • Yair Reiner, Oppenheimer: 1.1 million units in FY10 and 4M units in FY11
  • Scott Craig, Bank of America/Merrill Lynch: He forecasts Apple to ship 1.25 million units in FY 2010 and 3.75 million in FY 2011.
  • Keith Bachman, BMO Capital: He projects 2.5 million iPad units in FY 2010 and 5.5 million units in FY 2011.
  • Ben Reitzes, Barclays Capital:  Forecasts iPad sales of 2.9 million in FY 2010 and 7.3 million in FY ’11.
  • Gene Munster, Piper Jaffray: 2010 sales of 3-4 million units, expects 2011 to be the break out year, with 8 million units, with possible $4.6 billion in added revenue in calendar 2011.
  • David Bailey, Goldman Sachs: 6 million iPad units in 2010, for CY 2011
  • Katy Huberty, Morgan Stanley: CY2010 unit forecast 6 million; CY 2011 forecast is 9 million units

When the Apps Arrive, iPad Will Impress the Doubters

Some of the negativity surrounding the iPad has to do with its limited functionality. No multitasking? No Flash? No camera? But as the analysts below point out, when it comes to the iPad, we ain’t seen nothin’ yet. Once developers start releasing their iPad apps, the device will seem a lot more impressive than it does now.
Charlie Wolf, Needham & Company:
Wolf said the iPad is “another winner” from Apple but people won’t realize its potential until developers create iPad apps. “The iPad is not a revolutionary product. But it has the potential to become one once the creative juices of content providers are unleashed…The $500 starting price point is low enough to attract a sizable portion of the early adopter crowd, consisting of iPhone and iPod owners…Our best guess at this time is the Apple could sell four million iPads in its initial year on the market, which translates into at least $2 billion of revenue” (Source: AppleInsider & AllThingsD)
Tavis McCourt, Morgan Keegan:
“We suspect initial sales will be strong (this is Apple, and there are many enthusiasts), and then simmer down a bit after a few months. The ultimate success of a new product category will be the unique apps developed for this device, and with the SDK just going out today, it is hard to know how impressive they will be. However, the good news is that aside from maybe modest iPod Touch cannibalization, we doubt that the iPad will cannibalize any revenues from the massive margin pools within the iPhone and Mac product categories.” (Source AllThingsD)

It’s a Great Casual Gaming Device

Like the iPod Touch and iPhone, the iPad will attract casual gamers and game developers to its platform. However, the iPad won’t be considered a serious gaming device by the community. One analyst even claims it won’t generate significant revenue for developers.
Michael Pachter, Wedbush Morgan:
Pachter thinks the tablet will appeal to the casual gaming community. “I think the early offerings on the tablet will be a lot closer to iPod Touch/iPhone style games, and then probably morph into DS kind of games and then ultimately will morph into PSP quality games. The core audience is probably more of a casual game audience than a hardcore audience. So the one device I think will suffer from the introduction on the games side is the DS. And you’re going to see a lot of cross-fertilization of games between the iPod Touch, iPhone and the tablet, so I actually see the iPod Touch benefiting from that.” (Source: TGDaily.com)
Jesse Divnich, EEDAR:
Divnich thinks the iPad won’t appeal to serious gamers. “The iPad has limited functionality and limited controls and will not be taken seriously as a gaming platform from the industry…all publishers will support the iPad, as they do with the iPhone, but I do not expect any publisher to realize a significant amount of revenue from the iPhone/iPad platforms, which means that their iPhone games will have play a supporting role to an overall brand…EA doesn’t expect Sims 3 for the iPhone to be a cash cow; however, they do expect that consumers enjoy the iPhone version and then purchase the PC or console branded Sims games.” (Source: TGDaily.com)

But We’re Surprised there’s no Verizon Deal

Some analysts reported they were “shocked” by the lack of a Verizon deal. So were we. Larsen from Piper Jaffray speculates as to why that may be – GSM. Here at ReadWriteWeb, we’re hoping the delay is because Apple wants to surprise us with the news at their next big event where they announce iPhone OS 4.0.
Allen Weiner, Gartner Inc.:
“The choice to leave out Verizon was a surprise, given that AT&T has faced complaints from consumers that its network is overloaded by the iPhone…AT&T is going to need to make some sort of statement or some sort of acknowledgement that they’re up to the test of supporting this.” (Source: Business Week)
Chris Larsen, Piper Jaffray:
The choice of AT&T is probably due to GSM, the cellular tech used in large markets outside the U.S. including Europe. “If you can pick one device that you can ship everywhere, you’re going to bring down your manufacturing costs, you’re going to bring down your shipping costs. Verizon is going to be at a disadvantage.” Larsen predicts the iPad may generate $100 million in earnings a year for AT&T. (Source: Business Week)

The iPad is Just a Big iPod Touch?

Of course, in any round-up, there are going to be a few nay-sayers. The analysts below basically called the iPad a big iPod Touch. While their reviews aren’t necessarily out-and-out pans, they’re not as head-over-heels with the device as others have been.
James McQuivey, Forrester:
McQuivey thinks the iPad could be a miss. “The iPad is a grown-up iPod Touch. Apple has taken the safe route of offering its existing customers an option that goes beyond today’s iPod Touch in size and capability, but it has not offered a new category of devices that tackles the five-six hours of media we each consume every day. With no integrated social media for sharing photos, recommending books and sharing home video, the iPad misses a big piece of what makes media so powerful. As it stands, a quick, well-structured response from Amazon in the next version of Kindle could easily be a contender here.” (Source: AdWeek)
Gene Munster, Piper Jaffray:
“Originally we were estimating sales of 2m units in the first calendar year at a price point of $600-$800. With the actual $499/$629 price point, we believe Apple will sell 3m-4m units in the first 12 months….After using the iPad, we believe it will cannibalize iPod touch sales, but not Mac sales. The gadget is a premium mobile device, not a computer; as such, we see some iPod touch buyers stepping up to the iPad, but consumers looking for an affordable portable computer will likely stick with the MacBook lineup.” (Source AllThingsD)
Richard Gardner, Citigroup:
“Looks essentially like a super-sized iPod Touch…Investors are extrapolating that unit estimates could be materially higher than expected given the $499 base price. The flip side is that the low price point together with overlapping features does increase the risk of cannibalization of iPod touch sales.” (Source: Barrons)

Analysts are Generally Impressed

Still, at the end of the day, most analysts – especially those who got some hands on time with the device – walked away impressed. Although some of the reviews acknowledged the various disappointments regarding lack of features or functionality, the long-term view for the iPad is positive.
Mike Abramsky, RBC Capital Markets:
“With iPad, Apple creates a revolutionary e-reading, browsing, media, gaming experience. Newspapers, Web pages, books ‘come alive’ with video, animation, color and fullscreen touch.” And as for the mixed reaction in the tech community? “Not everyone initially liked the Ten Commandments either — but they endured.” Although he did find the lack of a camera, multitasking and no Verizon option disappointing, he said the simplicity of the device is its greatest strength. He forecast first-year sales of 5 million, adding 30 cents earnings per share to AAPL stock with an average iPad selling price of $600. (Source: AppleInsider)
Shaw Wu, Kaufman Bros.:
Wu thinks the Wi-Fi only version will be the best seller because of the $130 premium for the 3G version. After hands on time with the device, he was impressed. “We see iPad as a new product category that is superior as a shared device in a group setting (such as a living room or meeting) or as an ultra-portable computer. Sure, there could be some cannibalization, but it doesn’t quite replicate the functionality or form factor of either device.” (Source: AppleInsider)
Craig Moffett, Bernstein Research:
“Longer term, the iPad offers the potential to redefine the boundaries between print and video, turning formerly passive media into active ones, and in the process making what are currently low bandwidth applications (say, reading a newspaper) become much more bandwidth intensive (e.g. by embedding video rather than still pictures).” (Source AllThingsD)
Mark Moskowitz, J.P. Morgan
“iPad is not for everyone, and the first-generation product is sure to have its critics given the prelaunch buzz. In our view, the iPad is a smart, nimble device for heavy content users-Apple’s core customer. iPad is a hybrid of sorts, marrying select benefits of the smartphone and notebook. We expect the market to be small at first, but the gamer and education verticals should construct a meaningful growth ramp longer term.” (Source AllThingsD)
Yair Reiner, Oppenheimer
“It finally gives the right form to leisurely functions long trapped, like the Frog Prince, in the body of a late-20th century office productivity tool.” (What?) However, Reiner estimates iPad sales at only 1.1 million in fiscal 2010. (Source: CNN Money)
Ben Reitzes, Barclays Capital:
“In terms of features & services, we believe today’s launch was largely in line with expectations. However, the pricing is much more attractive than expected and clearly shows Apple desires mass market appeal. Even accounting for potential cannibalization of other products, we believe iPad adds at least $1.00 in EPS power quickly & $20 plus in value to Apple’s shares. He forecasts iPad sales of 2.9 million in FY 2010 and 7.3 million in FY ’11. (Source: Barrons)
Maynard Um, UBS:
“The two big surprises to us were the price points at the low end ($499 for a 16GB model) and the attractive monthly wireless plans with AT&T ($15: 250 MB data transfer; $30: unlimited), with no associated contract. We believe the lower price points & data plans likely increases the mass market appeal for the iPad (vs. prior expectations).” (Source: Barrons)

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