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Apple Hunkers Down as Earnings Call Nears

By Richard Adhikari MacNewsWorld ECT News Network
Apr 13, 2011 5:00 AM PT

Every morning this week, I've awakened with a vision of senior Apple executives swimming before my eyes. They're deep in an underground bunker, preparing feverishly for April 20.

Apple Hunkers Down as Earnings Call Nears

April 20 is the date on which Apple will announce its Q2 FY11 earnings.

Chances are, the members of the Apple gang are wearing ear-to-ear grins as they work, but that part of the dream always fades out, which kinda reduces my chances at prophecy as a career.

However, we all know demand for iPad 2s has been going through the roof, and analysts peg Q2 2011 iPad sales at anywhere from 5 million-ish to nearly 9 million, so I figure there are a lot of happy faces in the Cupertino underground War Room right now.

In fact, iPad 2 sales were so strong that rumors surfaced of their triggering a clash between Apple and Best Buy. The retail chain had reportedly put a ceiling on the number of iPad 2s that could be sold at its stores each day, which apparently led Cupertino to clamp down on supplies of the device to the retail chain. More on this later.

That has impacted other device manufacturers. Samsung, for one, has reportedly cut the price of its Galaxy Tab for the second time this year.

Meanwhile, the threat of Android is looming. Analysts not only figure the Google mobile OS will gain ground rapidly over the next few years, but also think iOS -- the Apple OS that powers the iPhone and iPad -- will slip and keep on slipping.

Further, Google is moving to reduce fragmentation of the Android platform, and this could bolster the OS's strength.

The Siren Song of the iPad 2

Reports of long lines outside retail stores waiting for the iPad are commonplace, as are stories about how corporations are embracing them.

Here are a couple of cases that illustrate just how much the iPad is becoming part of our culture here in America.

The Patterson School of Diplomacy and International Commerce at the University of Kentucky has launched a trial project in which students will work with iPads for an entire 18-month degree cycle.

Everyone involved -- students, faculty, staff and back-office personnel -- will use iPads for that period, program director Carey Cavanaugh told MacNewsWorld.

Meanwhile, the Auburn, Maine, school district has bought 285 iPad 2s for kindergarten students and their teachers in a trial project. The program will eventually be expanded to all 25,000 or so elementary school students in the community. Apparently, iPads help kindergarteners learn the alphabet faster.

Further, Piper Jaffray's Gene Munster reported to investors the findings of a recent survey: About 37 percent of American teenagers want to buy an iPhone in the next six months, and about 20 percent will purchase an iPad 2.

Gartner expects iOS to dominate the tablet market worldwide through to 2015, Gartner predicts.

During the Q1 earnings call back in January, Apple's chief financial officer said the company continued to be "thrilled" by iPad sales. Expect the thrill to continue during the Q2 earnings call.

The Best Buy Brouhaha

All that excitement over the iPad 2 led the Best Buy retail chain to slap a ceiling on how many of those tablets could be sold at each of its stores daily, according to the Boy Genius Report.

That led Apple to stop supplying Best Buy with the tablets, CrunchGear reported.

There were also reports that Best Buy managers had instructed staff to misinform customers who wanted to buy an iPad 2 about whether or not they were in stock.

Best Buy later told BGR that its stores had been asked to temporarily hold non-reserved iPad 2 inventory for an upcoming promotion. This was customary when there were supply constraints, Best Buy said. However, Best Buy did not address the question of whether or not staff were instructed to misinform customers.

"Best Buy continues to receive iPad 2 inventory from Apple on a regular basis," company spokesperson Sarah Anderson told MacNewsWorld, quoting a prepared statement. That, and the rest of the statement, constitute the stock response the retail chain has been trotting out to BGR and other media.

Asked about the so-called upcoming promotion Best Buy had previously cited as the reason for imposing a cap on how many iPad 2s could be sold, Anderson declined comment.

Apple did not respond to MacNewsWorld's request for comment by press time.

Android Tablets, Fragmentation and Other Stuff

The success of the iPad 2 has seen Samsung cut the price of its Galaxy Tab by $200, to about $200 with a two-year contract. This is the second time this year the company has slashed the device's price.

Meanwhile the Motorola Xoom isn't selling particularly well, having been picked up by only about 100,000 customers so far. Still, it is in the running.

Meanwhile, the overall threat of Android continues to grow.

The same Gartner forecast that said iOS would continue its dominance of the tablet market through to 2015 said the operating system's share would slip from 69 percent this year to 47 percent by 2015.

Meanwhile, Android's share of the market will climb from 20 percent to 39 percent during the same period, Gartner said.

Android's performance may be further bolstered by Google's move to reduce fragmentation of the Android platform -- handset manufacturers who want to tinker with Android have to go through Android head honcho Andy Rubin.

That might help developers, who are concerned about fragmentation of the Android OS.

Google spokesperson Randall Sarafa declined to discuss the company's moves about controlling defragmentation, pointing MacNewsWorld instead to Rubin's blog.

Still, Apple should be afraid. Be very afraid.

Apple share prices closed at $331.78, up 98 cents in a continuation of the roller coaster the company has been riding over the past few weeks.

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