Analyst: Half of iPad Mini sales will be cannibalizations
The importance of cannibalization is that by selling more iPad Minis at lower prices than full-fledged iPads, Apple may be gaining users but it's losing revenue. The assumption, of course, is that buyers of the iPad Mini, sans such a tablet, would have instead purchased a higher-priced iPad, which generates both more revenue for Apple and more profit.
Singh came up with a rough estimate of a fourth-quarter ASP, making several assumptions along the way, including total iPad sales during the period of 22 million.
"The net average ASP could come down near ~$500-$510, possibly lower," said Singh, also noting that his back-of-the-envelope forecast pegged the iPad Mini-only ASP at between $400 and $410, with that higher-than-$329 number resulting from some buyers choosing the more expensive storage configurations or the Wi-Fi + cellular models.
In an earnings call with Wall Street analysts last week, Apple hinted that it expects a large number of customers to pick the iPad Mini over the full-priced iPad, saying that it anticipates gross margins to slip in the fourth quarter.
"At a starting price of $329, the iPad Mini's gross margins should be safely above 30%, although lower than other iPads," said Singh.
Singh saw the move as part of Apple's strategy to cut off sales of smaller, cheaper tablets sold by Amazon and Google, even though to do so it's accepting lower margins and some serious cannibalization. "[But] it seems like a defensive strategy, in response to the heightened competition in the 7-in. space," said Singh.
The numbers, Singh argued, don't lie: Apple may portray itself as a premium brand, with customers willing to pay whatever the company charges, but the fact is that they're price sensitive, too.
"iPad buyers in general are quite brand conscious.... It would be fair to say that they're more concerned with the brand/ecosystem as opposed to the product specifications/features," Singh said. "[But] with the iPad 2 and iPad Mini, the brand and ecosystem cease to be a factor. What the data seems to suggest is that iPad buyers are quite price sensitive, as long as brand or ecosystem is not a factor."
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is email@example.com.
- iPad sales skew even more toward Mini
- Apple's Mac ends up in tablet cannibal pot, too
- The case for an iPad Pro
- Is Apple's 13-in. iPad a desktop for kids?
- Balky browsers tick off tablet owners
- The PC's fate hinges on tablets, but it's 2014 or bust
- iPhone, iPad dwarf mobile rivals in small- and mid-sized firms
- iPad grabs top spot in tablet purchase poll
- Tablets remain tops in American gift-buying plans
- iOS 7 now powers 3 out of 4 Apple devices
Read more about Tablets in Computerworld's Tablets Topic Center.
- Tablets in the Enterprise: A Checklist for Successful Deployment How can you enterprise manage and secure tablets in order to protect corporate data while providing access to the information and applications employees...
- Path Selection Infographic Path Selection Infographic
- Hyperconvergence Infographic A wide range of observers agree that data centers are now entering an era of "hyperconvergence" that will raise network traffic levels faster...
- Preparing Your Infrastructure for the Hyperconvergence Era From cloud computing and virtualization to mobility and unified communications, an array of innovative technologies is transforming today's data centers.
- Cloud Knowledge Vault Learn how your organization can benefit from the scalability, flexibility, and performance that the cloud offers through the short videos and other resources...
- LIVE EVENT: 5/7, The End of Data Protection As We Know It. Introducing a Next Generation Data Protection Architecture. Traditional backup is going away, but where does this leave end-users? All Tablets White Papers | Webcasts
Our new weekly Consumerization of IT newsletter covers a wide range of trends including BYOD, smartphones, tablets, MDM, cloud, social and what it all means for IT. Subscribe now and stay up to date!