Apple cements tablet market lead with new iPad

LONDON/NEW YORK Fri Mar 16, 2012 7:30pm GMT

1 of 14. Construction manager David Tarasenko poses with the first new iPad from a store in Sydney, moments after midnight, March 16, 2012. Apple Inc's new iPad went on sale in Australia early on Friday, greeted by throngs of fans hungry to get hold of the U.S. consumer giant's latest, 4G-ready tablet computer.

Credit: Reuters/Tim Wimborne

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LONDON/NEW YORK (Reuters) - Apple Inc's newest iPad looked like another hot seller on Friday as hundreds lined up at stores around the world to get their hands on the tablet, though the crowds and waiting times in some cities were less than in previous years.

The third-generation iPad has only a few new features including faster wireless connectivity and a crisper display, but analysts nonetheless expect Apple to dominate the tablet market well into next year.

"I just got hyped into it, I guess," said David Tarasenko, a 34-year-old construction manager who was the first to pick one up from a Telstra wireless store at midnight in Sydney.

The buzz helped propel Apple shares to touch a record high of $600 on the Nasdaq on Thursday, though they later erased gains and were trading at around $585 on Friday afternoon.

In New York, the queues were nothing compared with previous years. "I came by at midnight and nobody was here," said Peter Brown, 51, who owns a marketing and communications company in London and was waiting in line at Apple's flagship New York City store on Fifth Avenue.

The new iPad - Apple has refrained from calling it iPad 3 - has faster chips, fourth-generation wireless, a sharper display and a better camera, making it harder for competitors like Samsung's Galaxy, which also lack Apple's range of apps and content, to catch up.

On price, too, Apple's rivals will struggle to beat it. The new iPad starts at $499 in the United States, 479 euros ($630) in Germany and 42,800 yen ($510) in Japan. Only Amazon Inc's far more basic Kindle Fire is significantly cheaper.

Apple will continue to sell the iPad 2 but has dropped its price by $100 to start at $399. Some analysts expect sales of the new iPad to overtake the old. So far, the company has sold 55 million tablets since the first iPad was launched in 2010.

Even in a tough economic climate in some parts of the world, many buyers, like 27-year-old Steve Henry in Paris, said they would scrimp elsewhere if necessary.

"I save money on my other purchases for high-tech shopping," said Henry, a systems engineer at a railway company who was hoping to buy his first iPad mainly to watch films and read during his more than two hours of travel per day.

Some U.S. retailers offered special deals. At Target, customers who traded in their working iPad 2 could receive up to $350 in store credit, a spokeswoman said.

MARKET LEAD

Tablet sales are expected to increase to 326 million by 2015 with Apple largely dominating the market, according to research firm Gartner. By then tablets could rival sales of desktop computers, which Gartner expects to total 368 million units this year.

The enduring popularity of Apple products, and stock, have provided Chief Executive Tim Cook, who took over after the death of Steve Jobs last year, with a good start. The stock has jumped 45 percent this year to a market value of about $550 billion.

Canaccord Genuity analysts raised their target price on Apple stock to $710 from $665. Dickie Chang, an analyst with technology research firm IDC, said Cook will need to do more in future to keep up the company's astonishing momentum.

"The iPad is already a pretty mature product and it's hard to revolutionize it any further," he said. "I think he may have to come up with another product to mark his stamp. That could come in the form of launching a smaller iPad with a longer battery life, for instance."

UBS raised its target price to $675 from $550, and said the expected launch of the redesigned iPhone 5 in October was the big catalyst ahead.

Apple's top manufacturer is Foxconn Technology Group, whose factories in China are under scrutiny over labor practices. Small groups of labor activists tried to draw attention to the issue at stores in New York and San Francisco, where Apple employees handed out umbrellas to customers waiting in the rain.

Charlotte Hill, a representative of change.org, called for better worker protection. "We are hoping Apple's workers and people higher up in the corporate chain will hear us," she said in San Francisco, where about 200 to 300 people had lined up prior to the opening of the downtown store.

Amanda Bell, a law student and part of a group of protesters in New York, said: "There is a cognitive dissonance for most people between loving the product and hating the way it's made."

SMUGGLERS

The new iPad went on sale on Friday in 10 regions including Britain, Canada, Germany, Hong Kong, Japan, Singapore and Switzerland. Most of the countries outside the United States do not yet have the faster, fourth-generation telecoms networks that the new iPad supports, but that did not stop Apple's fans.

"I've come from Russia to buy an iPad for my three-year-old son David," Oleg Konovalov, a newspaper salesman, told Reuters in Tokyo. "Everyone in Russia wants an iPad, but to buy it there I will have to wait several months."

"This reminds me of the time 30 years ago when I waited 8 hours in the cold to see Lenin's Mausoleum."

In London, 21-year-old Piotr, who works at noodle bar Wagamama, said: "It's not for me, it's to sell. I will bring them to Russia to sell them."

In the Chinese city of Shenzhen, people keen to get their hands on the new iPad waited for them to be smuggled across the border from Hong Kong.

"We don't have iPad3s yet, but some will arrive later in the day when the students deliver them to us. We'll have more supplies over this weekend," said a store operator in Shenzhen.

"Customs has become stricter, but if you take one at a time across the border, that's still pretty safe. At most they'll ask you to take it out of the box to prove that it's for self use."

Online reviews of the new iPad overwhelmingly praised Apple for its improved screen resolution. "My epiphany came when I placed my iPad 2 next to the new model, with the same text on the screen. Letters and words that had seemed sharp on the older model five minutes earlier suddenly looked fuzzier," said one reviewer.

Shintaro Aizawa, 16, who waited 15 hours outside a Tokyo store, said: "After this, well, I'll first of all open it up and check it's as beautiful as I thought. Then I'll get some sleep."

GOLD STANDARD

As consumers lined up around city streets to buy the iPad, one firm that took the new device apart said Qualcomm Inc, Broadcom Corp and Samsung Electronics had all held on to their prized roles as key parts suppliers.

The inner workings of the iPad are similar to previous models, based on a "teardown" by a tinkerer from California gadget-repair firm iFixit, who queued up in Australia to get one of the new tablets and quickly took it apart for a Web blog.

IFixit said the iPad's display appears to be from Samsung, Apple's closest rival in the tablet market. It includes a Qualcomm LTE cellphone chip and a Qualcomm wireless modem for 3G and 4G. Broadcom supplies a semiconductor handling wireless tasks like WiFi and Bluetooth, according to iFixit.

Other technology partners include ARM Holdings Plc, Toshiba Corp, Elpida Memory Inc, Avago Technologies Ltd, Triquint Semiconductor Inc and Fairchild Semiconductor International Inc.

Analysts said Cupertino, California-based Apple sometimes uses more than one supplier for a part, so what is found in one iPad may not be present in others. Still, teardowns are a key source of information for investors and the appearance of unexpected chips can move stocks. ($1 = 0.7651 euros = 83.2900 Japanese yen)

(Additional reporting by Lee Chyen Yee in Hong Kong, James Topham and Ruairidh Vikllar in Tokyo, Sisi Tang in Hong Kong, Jens Hack in Munich, Axelle du Crest in Paris, Pauline Askin in Sydney, Dhanya Skariachan in New York and Poornima Gupta in San Francisco; Writing by Georgina Prodhan; Editing by Tiffany Wu and Matthew Lewis)

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