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Apple Swimming in Sales as iPad 2 Supplies Run Dry

Apple Swimming in Sales as iPad 2 Supplies Run Dry

With rivals scrambling to counter Apple's iPad with tablets of their own, Cupertino let fly Friday with iPad 2, though anyone visiting an Apple Store Saturday likely found the cupboards were bare. Retail locations quickly sold out, and online orders now carry month-long waiting periods. AAPL stock, however, has followed the rest of the market downhill on worries surrounding the disasters in Japan.

By Richard Adhikari MacNewsWorld ECT News Network
03/16/11 5:00 AM PT

It was deja vu all over again when the iPad 2 was released last week.

Long lines formed outside stores hours before the device hit retail shelves Friday, and customers snapped up the tablets in short order, leaving many supply rooms bare by the following day.

Estimates put iPad 2 sales at anywhere from 500,000 to 1 million.

The apparent success of the iPad 2 seems to put Apple even further ahead of the competition.

Meanwhile, Apple has released an update to the Apple TV operating system that will let owners watch live pro baseball and basketball games on their sets, a move that could boost demand for the device company CEO Steve Jobs once described as the company's "hobby."

AAPL's lead in the tablet field, however, may receive a boost from a most unwelcome factor. The series of quakes that began pounding Japan last week has forced several component manufacturers in that country to shut down some of their plants. This has led to a component shortage that's expected to impact other tablet makers more than Apple.

Gulping Down iPad 2 Tablets

Long lines of customers camped outside retail stores for hours to get a new Apple product are a familiar sight to Apple-watchers. About 700 people stood in line at the Apple store on the Upper West Side of New York, Barclays Capital said in a note to investors.

Estimates of the number of iPad 2 tablets sold ranged widely. Piper Jaffray analyst Gene Munster put the figure at 500,000 units, Barclays Capital set it in excess of that, and Wedbush Securities analyst Scott Sutherland figures nearly 1 million iPad 2s were snapped up.

The throngs may well have been made up of mostly iPad newbies. According to Munster, 70 percent of iPad 2 purchasers were new customers; RBC Capital Markets analyst Mike Abramsky said that only about 20 percent of iPad 2 buyers would be owners of the previous-generation Apple tablet.

More Good News for AAPL

Meanwhile, Consumer Reports -- which had previously taken Apple to task for problems it found with reception on both the GSM and CDMA versions of the iPhone 4 -- has issued a preliminary report endorsing the iPad 2.

By keeping the iPad 2's prices the same as those of its predecessor, Apple has ensured its device remains more than competitive with Android-based tablets, Consumer Reports stated. Although the iPad 2 is a very good choice in the tablet market, however, the competition does pose a threat, it added.

For the time being, though, competing tablets are too expensive and their manufacturers don't have a distribution network comparable to Apple's retail stores, according to Forrester analyst Sarah Epps.

Meanwhile, 25 percent of nearly 3,100 respondents to a ChangeWave Research survey in February said they plan to buy a tablet. Of these, 82 percent will opt for the iPad.

Further, Apple issued an update for Apple TV 2 that includes support for streaming content from MLB.TV and NBA League Pass. That essentially gives Apple TV subscribers live access to pro baseball and basketball games -- for a price.

Finally, Strategy Analytics issued a report Tuesday that claims Apple dominated the global smartphone market in revenues in 2010. Total global smartphone revenues hit US$99 billion, it stated.

Apple took 29 percent of that $99 billion, although it only had 16 percent of the smartphone market. Nokia was next with 20 percent of revenues, and RIM third with 15 percent, Strategy Analytics stated.

So Long, Tablet Wannabes?

Given that many iPad 2 competitors -- like HP's Touchpad, RIM's PlayBook and Samsung's 10-inch Galaxy tab -- have yet to launch, the strong sales of the iPad 2 seem to have consolidated Apple's dominance of the tablet market.

Still, the threat of competition does exist. The Motorola Xoom, for instance, is in circulation.

Also, Amazon.com could mount a powerful challenge to the iPad, Forrester's Sarah Epps has suggested. Other possible threats might come from Sony, Microsoft and Vizio, she remarked.

However, competitors' plans may have temporarily been dashed because of the quakes ripping through Japan, which began last week.

Operations at major manufacturers, including Toshiba and Sony, have been reduced because of widespread power shortages resulting from the quakes. Sony makes various electronics products and components, including semiconductor lasers and lithium-ion batteries.

Toshiba, a major exporter of computer chips, is running only essential business operations.

Meanwhile, DRAM and NAND flash memory chip prices are rising in Japan, which accounts for nearly 36 percent of the world's NAND flash production and almost 14 percent of its DRAM production.

"The component in the supply chain we've identified as being potentially the most vulnerable right now is NAND flash," Rhoda Alexander, a director at IHS iSuppli, told MacNewsWorld.

"Toshiba's one of the big suppliers of NAND flash, and some of the companies that are low on the totem pole could get squeezed," Michael Yang, an analyst at IHS iSuppli, told MacNewsWorld.

NAND flash is essential in the manufacture of tablet PCs, and companies that are smaller or less well-known may have to wait to get supplies, whereas the larger companies may not.

"If you're a Motorola or an Apple you have a little more leverage to work with suppliers and be one of their top priorities," Yang pointed out.

"Net/net, you'll probably have a better chance of getting iPads than lower-ranked tablets," Yang said.

Apple did not respond to requests for comment by press time.

Apple shares, along with much of the rest of the market, continued their roller-coaster ride Tuesday, closing at $345.43, down 2.3 percent.


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