Pleased to see Steve Jobs, wowed by the device’s performance, fearful for the competitors
A sampling of analysts’ reactions to Apple’s (AAPL) iPad 2 event. By midday Thursday we’d received 20 reports.
Oppenheimer’s Yair Reiner: The just unveiled iPad 2 offers the kind of incremental improvements consumers have come to expect from a second-generation Apple device. While it doesn’t include any new breakthrough features or functionalities, the sum total of its refinements and upgrades—thinner, lighter, faster, more connected—significantly enhance the device’s overall appeal. The closest historical parallel would be the iPhone G2.5 to 3G transition, whose slew of relatively minor upgrades allowed sales to more than triple in the product’s second year. This is a sad day for the crowd of competitors still struggling to home in on the first iPad’s price and performance. We continue to see Apple grabbing 75-85% of the tablet market in 2011.
Morgan Stanley’s Katy Huberty: Although there were no big surprises today, following our hands on demo we think that the iPad 2 delivers dramatic performance improvements and an important reduction in thickness/weight improving the overall user experience. … After using the original iPad over the last year, our iPad 2 demo revealed significantly faster webpage loading speeds and overall performance. Besides the performance improvements, iPad 2’s reduction in thickness and weight should not be underestimated. The device is sleek – 33% thinner and 15% lighter than the original iPad (and vs. many 10” competitors) which has an important impact on the overall user experience.
RBC’s Mike Abramsky: Steve Jobs appearance from medical leave was a welcome surprise to the event (although he did not say whether or not he would return to Apple), while other announcements and iPad 2 features were largely inline… iPad 2 raises the bar and sustains pressure on competitors, and continues to target media-centric tablet consumers seeking a premium experience. iPad 2 doesn’t alter competitive landscape for pending Android tablets or PlayBook, which may appeal to different market segments (like Android/Google fans, productivity-centric or enterprise segments).
Needham’s Charlie Wolf: Pad 2 immediately obsoletes a flood of media tablets that are finally beginning to appear a year after the iPad’s introduction. Competitive tablets can emulate the hardware features of the iPad. But none can or probably never will match its software. Nor can they match its price.
Susquehanna’s Jeff Fidacaro: Our recently published supply-chain checks suggest total iPad builds of 6.9 mln-7.1 mln for CY1Q11 due to some seasonality and is comprised of only ~2 mln iPad1 units. This corroborates with a Digitimes article suggesting a build of 6 mln-6.5 mln iPads (including iPad2) in CY1Q11 and 40 mln for CY11. We anticipate a workdown of iPad1 inventory and a significant ramp-up in iPad production in CY2Q11 to 10 mln-12 mln units. Our March- and June-quarter iPad estimates call for 5.25 mln and 8.5 mln shipments, respectively.
Barclay’s Ben Reitzes: We view today’s announcement as impressive and the early ship date, March 11, as a positive surprise that should provide upside support to C1Q iPad estimates. We also view Steve Jobs’ appearance as a positive, but we focus on Apple’s strong fundamentals and iPad supply chain builds of over 40 million units this year alone as key to the thesis moving forward. iPad 2 is impressive and should keep competitors at bay.
Citigroup’s Richard Gardner: On purely a hardware spec basis, the iPad 2 allows Apple to catch up or exceed competitors’ current features (see fig.1). The most glaring criticisms had been the lack of front and rear facing cameras and a dual core processor, both of which have been resolved. The iPad 2 continues to lead in battery performance (+10 hours), and is now the thinnest and lightest 10” tablet in the market. In addition to the hardware, the iPad will be advantaged due to 1) an aggressive entry price of $499, which will be difficult to match given Apple’s cost advantage, 2) its ability to attract developers (65,000 tablet-specific apps on iOS, vs. an insignificant number on other platforms), 3) Apple’s impressive installed base of more than 200M accounts linked to credit cards, and 4) a seamless and intuitive user experience, which remains unmatched.
Deutsche Bank’s Chris Whitmore: We estimate the iOS installed base is 185M+ units (iPhone, iPad and iPod touch) with over $2B of App revenue earned by iOS developers to date. In addition, there are over 65K Apps specifically designed for the iPad (vs. ~100 Android Honeycomb Apps). We expect Apple’s lead to extend as this installed base attracts even more developers, whose new Apps will attract even more users. In addition, we expect strong broad support (AT&T and Verizon) coupled with unmatched distribution (Apple retail stores, online, Best Buy, int’l etc) to propel strong growth of this device.
Goldman Sachs’ Bill Shope: We believe the iPad 2 introduction and the June iPhone refresh will serve as critical catalysts in the coming months. Our model had conservatively assumed that the company would lower wholesale ASPs, so we are adjusting our estimates to reflect the unchanged price points. We are maintaining our unit estimates due to our view that the iPad 2 will accelerate Apple’s competitive momentum in tablets.
JP Morgan’s Mark Mosckowitz: We think the overall improvements, inside and out, should sustain, if not add to, the company’s market leadership in tablets. In our view, what is suitably impressive with today’s iPad 2 launch is the arrival of a second-generation iPad just as the competition is rolling out or prototyping their first-generation tablets.
Morgan Keegan’s Tavis McCourt: Overall, there was nothing extremely surprising in terms of specs, and still believe that other vendors will have difficulty selling 10 inch tablets at similar price points and functionality as Apple. However, we still view the tablet category as incrementally positive for nearly every smartphone vendor adding this form factor. The laptop value chain appears to be the clear loser.
Merrill Lynch’s Scott Craig: What was not expected was the appearance of Steve Jobs whose health has been the subject of speculation since January. While we don’t expect this to be a catalyst for the stock, we believe investors find it reassuring. We believe risk/reward remains favorable predicated on gross margin tailwinds, revenue growth opportunities, anticipated upward revisions to EPS and valuation. Maintain Buy.
BMO’s Keith Bachman: We note that the original iPad sold 1 million units in approximately 1 month of shipment (US only) and 2 million units in less than 2 months. Our checks indicate mass production started in February, but volumes are modest. Hence, we believe iPad 2 unit shipments for the March quarter could be in the 500K to 1 million unit range.
Gleacher’s Brian Marshall: While we were surprised by Steve Jobs’ presence at the iPad 2 launch event, his appearance actually improved from his last public event, in our view (obviously a good thing). Importantly, he did not draw focus away from the main event … the iPad 2 introduction … which did not disappoint. Heading into the event, we had no intention of upgrading our gen 1 iPads, but after testing the new device, we may have changed our minds.
USB’s Maynard Um: Given price points/features, we expect AAPL to maintain leadership in the increasingly competitive tablet mkt. Note AAPL maintained price points between $500-830 despite improved features (Motorola’s Xoom $800 unit compares to AAPL’s $730 iPad 2).
JMP’s Alex Gauna: Although there will no doubt be criticism around the lack of 4G, we recall that the original iPhone shrugged off similar concerns over its 2.5G introduction, that 3G data speeds already rate as impressive, and that Apple has a strong track record of pushing the right technology envelops at the right pace. We know of no other, nor expect any other, tablet offering in 2011 to match the value proposition of the iPad2, particularly in the area of Apps, and subsequently we are raising our FY11 iPad estimate from 29M to 35M units while noting the potential for further upside towards 49M…
Stifel Nicolaus’s Doug Reid: Overall, we come away from the iPad 2 event convinced that for most consumers the iPad 2 will offer the most compelling value proposition relative to competing Android devices based on price, performance, and aesthetics. That said, we believe many investors underestimate current demand for Adobe Flash support on tablets which remains massive, and entirely unmet by the iPad 2.
Think Equities’ Rajesh Ghai: While the cost of material may decrease slightly with the slimmer form factor, we expect the increased manufacturing costs to offset the savings. The addition of new components such as the front and rear camera, as well as the more powerful chip and unannounced but likely increased memory will increase the cost of components, but new supply agreements at significantly larger volumes should offset these changes. We remind investors that Apple recently secured close to 60% of the global touch panel capacity through panel makers such as Wintek and TPK. We believe these new agreements will ensure that supply is able to more readily meet demand, as well as placing increased pressure on competitors attempting to ramp to production volumes.
Canaccord Genuity’s T. Michael Walkley: We believe that Apple’s pricing of the iPad2 ($499 for WiFi-only, $629 for 3G base models) will pressure sales of competing offerings including the Motorola Xoom ($599/$799) and BlackBerry Playbook (expected $499) as we believe consumers will overwhelmingly choose iPad2 versus other tablets at these price points.
Jeffries’ Peter Misek: Despite the launches of many competitive tablets, we believe Apple’s product leadership, vertical integration, and vast scale will cause it to win the largest share of the tablet market and the majority of the economic benefits. We believe that the announcement was positive, but broadly in line with expectations.
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