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  • Don’t Pay Attention to Non-Apple Numbers

    October 8th, 2010

    On October 18, Apple will release financials for the September quarter. They are expected to be record-breaking, and financial pundits are trying to put forward their best guesses as to what those figures might be.

    At the same time, estimates are all over the place as to how much Apple gear was sold during that period. I've heard talk of 11 to 13 million iPhones and close to four million Macs. These figures do make a fair amount of sense, and fall in a narrow range. However, when it comes to the iPad, the numbers are all over the place.

    The impact of the iPad is still one huge question mark. Some suggest that flagging netbook sales are a sure indicator that customers are opting to pay a little more for the flashy, iconic iPad. Others say the success of the iPad has yet to impact any other product in a meaningful way.

    When it comes to netbooks, I just think customers have come to realize Apple was correct, which is that those shrunken portable computers just aren't very useful. I realize most people probably buy them to accompany existing gear, something light, cheap and useful for email, Internet access and some light productivity chores. Unfortunately, the PC makers evidently took the easy way out in building such gear, and that is to make it smaller, cheaper and lighter, without regard to the user experience.

    Although industry analysts don't fully agree with me, I've been of the opinion that the netbook took off so quickly in the last couple of years largely because buyers wanted to save money due to the economic crisis. So they had the choice of getting something really cheap, or buying nothing at all.

    The PC makers, in their rush to feed the bottom of the market, didn't care. A sale is a sale, even if profits are minimal. Maybe they can persuade customers to trade up next time. Unfortunately, they don't seem to realize that an unhappy customer isn't necessarily going to just buy a second product from the same company, even if it solves the problems that existed in the original product. They are apt to just look to another manufacturer next time.

    Indeed, one of the reasons Apple does so well as the product lines fatten is the historically high level of customer satisfaction. A very large portion of iPad owners previously purchased other Apple gadgets, and they were, obviously, happy campers.

    In any case, starting with estimates that five million tablet computers would be sold through all of 2011, it now seems as if Apple exceeded that number in the last quarter, not to mention the original 3.27 million iPads sold during its first 80 days on sale.

    Consider, also, that it has also been reported that Apple's contract factories are now building three million iPads a month, and you know that this is one company that operates lean and mean, striving to just meet customer demand, never exceed that demand. Immediate shipment is great, but it looks better if you have to wait a few days in the weeks after a new model is introduced.

    So if Apple is building three million iPads a month, that translates to an expectation of selling nine million per quarter. But most estimates don't exceed six million, so go figure.

    On the other hand, all bets are off for the rest of the year, and sales in 2011 may be off the charts. The estimates range from 21 million to 45 million. Either way, the iPad will soon exceed the user base of the traditional Mac, but there's no indication that sales of the latter will be hurt, at least for the near future. Or maybe the Mac's potential growth curve is so large that a minor erosion will make little difference.

    Regardless of where the numbers end up, and it's clear that estimates of this sort indicate the so-called industry analysts haven't a clue, the iPad has already become another Apple iconic gadget. You'll find iPads featured in TV shows, and movies can't be far behind.

    More to the point, competitors clearly do not understand how to build an iPad killer. None of the products released so far demonstrates a compelling alternative. At best, the imitators sport a handful of features that aren't on the iPad yet, such as a front-facing camera, or perhaps that and a rear one as well.

    It's pretty certain that the next iPad will sport at least one camera, probably in the front for FaceTime, although Apple isn't going to confirm such things. But when you consider Apple's desire to expand FaceTime to as much hardware as possible, such a capability seems, well, natural.

    In any case, it's clear the industry was caught flat-footed with the iPad. Price estimates were much higher than the ones Apple finally set. Indeed, with iPad killers that may be priced higher than the original without a data contract with a wireless carrier, it's clear Apple has found the magic bullet for keeping costs down, and quality high.



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    4 Responses to “Don’t Pay Attention to Non-Apple Numbers”

    1. [...] This post was mentioned on Twitter by breizh2008, Gene Steinberg. Gene Steinberg said: Here's my latest Tech Night Owl commentary: : Are Smartphones Now Commodities? http://bit.ly/bSiv5Y [...]

    2. steffenjobbs says:

      There was some mention in the fledgling tablet industry that more than a few companies were upset because Apple seems to have cornered the market on tablet components (touch-screen displays and flash memory) and it seemed rather unfair to them. I'm sure they'd like to report to the Feds that Apple is practicing anti-competitive strategies. I get a laugh out of that.

      When Apple first announced the iPad to derisive laughter that netbooks were the hottest thing going and that consumers have absolutely no use for tablets. In fact, the PC vendors said, there was no consumer tablet market. Previous Windows tablet failures were surely proof enough. Most of those PC companies didn't give a hoot about Apple's iPad until they saw that 3 million unit sales number staring at them in their faces. Apple had already bought up most of the component supplies and assembly time for months in advance for the iPad production runs. Then came the mad scramble of the rivals, running around like headless chickens, first thinking they could modify their netbooks and turn them into tablets. When they found out that wouldn't work, the rival tablet companies started trying to find new tablet components, but Apple had locked them all away for itself.

      So what we have now is a whole bunch of greedy rivals with no real tablet plan and not enough components to mount any serious attack against Apple's iPad. They're going to be paying through the nose for small production runs, at least compared to what Apple will be producing. Tens of millions against tens of thousands. Sweet. Apple has all those dudes by the short hairs and will be nice and safe all the way through 2011. I guess Steve Jobs showed them who's their daddy. Apple will run up past $300 into earnings. Jingle, jingle thanks to the big ol' iPhone toy without USB ports and no Flash support iPad.

    3. Kaleberg says:

      "A very large portion of iPad owners previously purchased other Apple gadgets, and they were, obviously, happy campers."

      That might explain Apple's decision to require a personal computer for setting up one's iPad. If they just sold stand alone iPads, there is a good chance people hoping for a cheap PC would realize that iPads are not just a different kind of PC. Such disappointment, as you noted, has consequences. As things are now, they assume you have a PC already and are more likely to consider the iPad an adjunct, a walking around accessory to one's main computer. I am sure Apple considered a number of technical approaches for allowing iPads to be set up without a base computer, but the market risks would have been unacceptable. In a few years, Apple will probably reassess things, and probably let iPads go standalone, but by then we'll all have cloud based identities, and we could just as well borrow a portable as buy one.

    4. Alan Smith says:

      “A very large portion of iPad owners previously purchased other Apple gadgets, and they were, obviously, happy campers.”

      Given Apple's high satisfaction rate with the iPad, buyers will most likely continue to buy more Apple stuff. Ka-ching!

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