FQ2 iPad Unit Sales (Revisited)

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    Posted: 20 March 2011 03:35 AM #16

    Gregg Thurman - 20 March 2011 06:27 AM

    “Error Message:  Unable to receive your submission at this time”

    That’s happened to me in the past. I always wait 15-30 min. and then check the board to see if my post went through before trying again. Most of the time the post did not show up, but sometimes it does.

         
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    Posted: 20 March 2011 04:21 AM #17

    I’m going to hold steady at 6.25m…

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  • Posted: 20 March 2011 04:41 AM #18

    Gregg Thurman - 20 March 2011 06:11 AM

    I think the only real way to look at iPad unit sales is to start with Apple’s March quarter guidance.

    Firstly, Apple guided $4.90 for FQ2.  Apple guided $4.80 for the December quarter, then reported $6.43.  That’s a ratio of 1:1.34.  If we apply that ratio to March quarter guidance we get EPS of $6.56.  Yes, it is that simple when you have watched Apple guide, and report, like that for the past 6 years.

    I applied seasonality to Mac, iPod and iPhone sales (Verizon isn’t going to bump worldwide iPhone sales that much), then adjusted iPad sales to make up the difference in earnings.  With an iPad unit sales estimate of 7.7 million units I arrive at EPS of ~$6.25, well below that predicted by the guidance to actual ratio.

    It takes an increase in iPad unit sales (QoQ) of 25% (9.2 million units) to get an EPS of $6.57 (ratio predicts $6.58).  I have a hard time (emotionally) with a number that large, but think it possible.  I’m just not ready (again emotionally) to officially forecast a number like that, then put my money where my mouth is, and invest.

    eps of $6.57 would represent an increase of over 97.3% and far above the FQ1 rise of 75.2%. I’m not estimating a eps rise on the quarter near that level.

         
  • Posted: 20 March 2011 12:59 PM #19

    I am worried about Q2 iPad sales and earnings contribution.

    If the are quoting 4-5 weeks delivery, then those will be for q3.  Plus close to zero iPad1 sales outside the US for sure since the launch.  (No one will buy IPad1 at full price after the 2 was announced and the 2 isn’t on sale until the very last day.)

    So they must have crippled a third to a quarter of Q2 iPad sales with such late-in the quarter launch.

    What am I missing?

         
  • Posted: 20 March 2011 01:31 PM #20

    iphoned - 20 March 2011 03:59 PM

    What am I missing?

    Nothing.  grin

    What we don’t know is the impact on iPad sales following the iPad 2 announcement and whether or not demand had slowed ahead of that event based on speculation of a forthcoming new model.

    Outside the Apple iPad there is virtually no market for a tablet product. I think Motorola Mobility made a big mistake coming to market with a product that wasn’t ready and entering a market that does not exist for the product.

    [ Edited: 20 March 2011 02:56 PM by DawnTreader ]      
  • Posted: 20 March 2011 02:04 PM #21

    >>nothing

    I guess I don’t understand why they could’t wait till April with the launch and thus avoid q2 sales issues and build up iPad2 supply inventory at the same time. 

    Something just doesn’t add up here..

         
  • Posted: 20 March 2011 02:09 PM #22

    The only explanation I can think of is that iPad sales were falling off the cliff in q2, only then the launch timing with not enough inventory makes some sense.

    But if true, this does not bide well for iPad q2 earnings contribution and needs to be factored into the estimates.

         
  • Posted: 20 March 2011 02:24 PM #23

    DawnTreader - 20 March 2011 04:31 PM
    iphoned - 20 March 2011 03:59 PM

    What am I missing?

    Nothing.  grin

    What we don’t know is the impact on iPad sales following the 1Pad 2 announcement and whether or not demand had slowed ahead of that event based on speculation of a forthcoming new model.

    I agree (to the “nothing” statement).

    I think our desire to know the cause of anything is driving us to distraction.  The variables affecting sales are innumerable.  Some variables run counter to other variables.  All are based on unknowns.  It gives me a headache just thinking about them.

    Even though the ratio between December guidance and actual results suggests March quarter EPS of $6.58, I have a hard time with the number myself, preferring $6.27.

    The deal is though, that Apple did guide higher for the second quarter than they did for the first quarter.  I think that is what we should be focusing on.  How they get there isn’t nearly as important (unless they are baking in an amazing, one time, favorable tax consequence [very possible]).

    Using methodology I’ve been using for ~4 years (and has been fairly accurate - getting me to within 5? of December quarter actual), then adjusting iPad units to achieve factored guidance is not unreasonable, just mindboggling high.

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  • Posted: 20 March 2011 02:45 PM #24

    >>Makes zero sense to wait launch. Tell me why you wouldn?t launch as soon as you had at least a few hundred K units built.

    because you kill existing product sales withou having enough new product to meet demand and you do so at the end of the quarter without room to make up the sales.

         
  • Posted: 20 March 2011 03:06 PM #25

    adamthompson3232 - 20 March 2011 05:18 PM
    iphoned - 20 March 2011 05:04 PM

    >>nothing

    I guess I don’t understand why they could’t wait till April with the launch and thus avoid q2 sales issues and build up iPad2 supply inventory at the same time. 

    Something just doesn’t add up here..

    Makes zero sense to wait launch. Tell me why you wouldn’t launch as soon as you had at least a few hundred K units built.

    Ordinarily Apple doesn’t release product refreshes with significant inventory of older models remaining in the marketplace. Price protection contract clauses can be expensive and Apple prefers not to see the company’s products discounted.

    I suspect one or two (or a combination of the two) causes led to the March release with significant channel inventory of the original iPad remaining in the pipe. Sales of the original iPad slowed significantly as speculation of the iPad 2 became common.

    The release of the Motorola Xoom prompted Apple to announce and release the iPad 2 in the March quarter. The iPad 2’s release most likely destroyed Motorola Mobility’s ability to build any kind of sales momentum for that product.

         
  • Posted: 20 March 2011 03:14 PM #26

    DawnTreader - 20 March 2011 06:06 PM

    The release of the Motorola Xoom prompted Apple to announce and release the iPad 2 in the March quarter. The iPad 2’s release most likely destroyed Motorola Mobility’s ability to build any kind of sales momentum for that product.

    I don’t know about that. Moving up a release date in order to destroy the minuscule sales of an insignificant competing product seems very petty and very short-sighted to me. I’d like to think that Apple is more of a long-term thinker than that.

         
  • Posted: 20 March 2011 03:25 PM #27

    FalKirk - 20 March 2011 06:14 PM
    DawnTreader - 20 March 2011 06:06 PM

    The release of the Motorola Xoom prompted Apple to announce and release the iPad 2 in the March quarter. The iPad 2’s release most likely destroyed Motorola Mobility’s ability to build any kind of sales momentum for that product.

    I don’t know about that. Moving up a release date in order to destroy the minuscule sales of an insignificant competing product seems very petty and very short-sighted to me. I’d like to think that Apple is more of a long-term thinker than that.

    It’s not petty. It’s economic war (you like those analogies).  :wink:

    The Xoom is overpriced and was shipped prematurely. Still, it was (and I’m using past tense for a reason) the first credible competitor for the Apple iPad. If the market for the product (or its potential market) is destroyed, it removes competition and dissuades developers from investing resources in the product or platform.

    As it is there’s nothing to follow the Android smartphone to build the Android eco-system. In my view (and I’ve said it before) Google overstepped and got ahead of itself on the Android smartphone.

    In the domestic market the Android smartphone was attractive for two reasons:

    1. It attracted smartphone makers through the illusion of a viable economic model through a no-cost/low-cost OS.

    2. It is profitable for service providers because of price competition among makers for unit sales allowing for downward pressure on prices with rich data revenue from sales to consumers.

    The market will soon discover the primary driver of Android handset sales in the US (Verizon) learned the hard way the iPhone is a much better product for purposes of customer satisfaction, customer loyalty and customer growth.

    I know I’m using strong words here, but I think the Verizon iPhone has dampened demand for Android handsets from customers on that network and will put even greater price pressure on Android handset makers in competition for unit sales.

         
  • Posted: 20 March 2011 03:25 PM #28

    I am less concerned with Q2 sales than with potential impacts to Q3 production ramp from any supply chain slowdowns due to the earthquake/tsunami/electrical power situation in Japan.

         
  • Posted: 20 March 2011 03:35 PM #29

    Roni - I agree.

    Personally I don’t give a rats ass whether the sale of an iPad is postponed in Q2 and is subsequently sold in Q3.  So long as no sales are lost as a consequence of short supply (and I don’t think there will be any - people don’t just buy iPad’s as an impulse buy, therefore waiting a month longer to get one isn’t such a big deal).

    We still have fairly limited info as to what affect the Tsunami had on components for the whole of Apple’s supply chain.  That is by far the biggest concern that I have re Apple at present.

         
  • Posted: 20 March 2011 03:40 PM #30

    The iPad is not the bread and butter product for FQ2. I’m less concerned about current events and more concerned about the tablet market itself. Outside of the Apple iPad it currently doesn’t exist.