New iPad Hints at Apple’s Future
03/14/2012 8:30 am EST
Though many tech experts have some complaints about the new iPad, MoneyShow’s Jim Jubak thinks it reveals some insights that could have an important influence on future profits.
By now, you’ve probably heard every techno geek in existence talking about Apple’s (AAPL) new iPad 3.
They’ve talked about, well, the processor is not quite as fast as the processor in the iPhone 4S and that’s a little disappointing, and gee, the form of the thing looks pretty much the same, although you’re going to be able to get it in black and white, as opposed to just black.
You know, these are what we’ve been thrashing over after the announcement from Apple of the new product on March 7. But what really interests me most is sort of what this tells us about Apple as a business, and about where it’s going as a business.
I mean, first of all, they’ve introduced not just an iPad 3, but they’ve introduced sort of an iPad 3A or a 3+, the one that will handle 4G from AT&T (T) and Verizon (VZ) as two big selling partners. Now, the price on this is like $629 to $829—way at the upper end.
You’re talking about a product that’s not going to attract a very large numerical audience. But this is a really smart move by Apple to keep its distributors on its side, because basically maybe this is only about 10% of the audience, but the folks who buy the iPad 3+ or the LTE—whatever you want to call it—they’re going to be such heavy data users that they’re going to be very, very profitable customers for Verizon and AT&T, and that will keep them selling iPads.
The second thing is that all of the stuff Apple has done to the $499 iPad 3—better resolution of screen, better camera, the addition of a high-def camera so that it does 1080p, the increased speed—all of that stuff really has enabled them to take the iPad 2 down a notch in price. So now you’re talking about selling the iPad 2 for $399.
That’s still $200 more expensive than Amazon’s (AMZN) Kindle Fire. But considering that nobody thought the Fire stacked up in terms of what it could do in functionality to the iPad 2, the fact that Apple has collapsed the price will draw some people off of that market, and they will say $200 is worth it.
It’s interesting that Apple is not willing to sacrifice the margins to go straight after Amazon. There is good evidence that Amazon is not making any money on the Kindle Fire. Apple has decided not to go there…but it is interesting that they are indeed creating a kind of lower-priced product that will compete with some of the Kindle Fire audience.
And the last thing is really the way in which this greases the way for Apple TV, and tells you about where Apple’s going to put some of the $100 billion in cash that it’s got burning a hole in its pockets.
You know, there’s talk about a dividend. There’s talk about a one-time special payment. But one of the things about Apple TV in this announcement: they kept the price the same, they really didn’t do much about it, and they said, "Well, you know, it’s going to enable you to play your stuff from iTunes, and you’ll be able to play Netflix (NFLX) and the stuff that you’ve got stored in the iCloud you can put on this device…" But it really feels like a product that doesn’t have enough content.
One of the uses that a lot of people have been talking about for Apple’s cash is signing more content agreements with movie producers and TV networks so that you can put more onto the Apple TV when you take it to a full-scale TV product.
I mean, that seems to be where Apple is going, and certainly, you need a lot more content than Apple announced to make the Apple TV really work as a product. I think Apple learned that the last time around, and I think that’s where they’re going and that’s where I think the cash will be very, very useful.
That, I think, rather than the processors or whatever, is what’s really important about the iPad 3 introduction.
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