John Paczkowski

Recent Posts by John Paczkowski

Apple’s Tablet: A $2.8 Billion Business?

apple-tablet-jobs-squareWe’re still a few days away from the presumed unveiling of Apple’s mythical tablet computer and already, analysts are trying to divine the impact the new device will have on the company’s bottom line.

RBC Capital Markets analyst Mike Abramsky expects Apple (AAPL) to sell five million tablets in the product’s first year at market. At a retail price of $600 and a 30 percent gross margin, that would generate about $2.8 billion in revenue and add 30 cents to earnings per share. This assumes the tablet is neither a hit (iPhone) nor a niche product (MacBook Air), but ends up somewhere in between, the scenario Abramsky believes most likely.

As Abramsky cautions, nailing the sweet spot on price is crucial to the device’s success. “Pricing is key….Significant demand exists at $500-799, narrowing at $1000 at which level subsidies may be needed (assuming a mobile data version) for mass acceptance, suggesting both retail and carrier marketing/distribution similar to iPhone.”

The analyst asserts that “An Apple tablet priced at $500-700 unsubsidized ($200-300 subsidized) strikes squarely at heart of the entry level laptop and Netbook markets. Although the tablet would not offer the breadth of features or raw performance of traditional laptops, it would deliver an optimal experience for buyers looking for user-friendly, media-centric computing at entry-level price points.”

As for the effect of the tablet on other Apple products, “The tablet may cannibalize some Mac and iPod Touch buyers (est. 2-5% in scenario analysis), but the lack of Mac OS X compatibility (and emulated Windows) reduces the appeal of the tablet as a Mac replacement for Apple’s traditional premium Mac buyers.”

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— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google