- iPad with 128GB to launch tomorrow
- Is Apple trying to please margin-wary investors?
- Will 128GB storage be enough for corporate market?
- Does the iPad need corporate apps such as Microsoft Office?
Tomorrow Apple will start to ship the 128GB iPad. Available in black or white, the new 128GB version will cost £639 for the Wi-Fi model and £739 for the Wi-Fi + Cellular model.
That's double the capacity of the 64GB models for just £80 more. Or a 128GB iPad with LTE LG capabilities for £190 less than a 128GB MacBook Air, without a cellular connection.
There has been a lot of speculation about why Apple decided to introduce this new model since the press release was issued on 29 January. That date is significant – it was less than a week after Apple announced its financial results and came in conjunction with a press release announcing that Apple had updated iOS to 6.1 adding more LTE carriers.
MacNewsWorld is skeptical about the timing: "This seems as if it's geared toward Wall Street analysts as a reminder that Apple's iPad isn't just another consumer device that has to play at the low-cost household kitchen table," writes that site.
That report speculates that the two releases "have the feel of something crafted for the naysayers rather than the enthusiasts".
News that Apple will sell a £739 version of the iPad certainly goes so way to appease investors who were concerned that the iPad mini is cannibalizing sales of the iPad, meaning that Apple makes less from selling the device than it had previously.
The 128GB iPad - good margins
As we noted in our review of Apple's financial results, even before the results were announced people were expecting Apple to report that its margins were down – the amount of money it was making in profit from the sales of each product. Apple anticipated a gross margin of about 36% during the first quarter of 2013, this compares to a gross margin percentage in 2012 of 43.9%, and to 40.5% in 2011. Apple actually managed a gross margin of 38.63%. For the next quarter the company is forecasting gross margins between 37.5% and 38.5%.
Interestingly, if you look at the revenue per unit sold, it appears that the average revenue from the iPhone remains the same at $641 per unit (give or take a week), the iPad is less as $467 compared to $570 and Mac is slightly more at $1,359 compared to $1,260. So, one would imagine, there has been some cannibalization of the higher priced iPad.
This evidence of the iPad mini cannibalizing sales of the high-end iPad highlights one of the issues associated with the calls for Apple to start selling a budget iPhone. Apple will make less money from a lower cost device. As we wrote, good profit margins, rather than growing market share is best for Apple.
On that basis we believe it is likely that one of Apple's motives for launching the 128GB iPad is to ensure that it can up its margins on sales of the device.
Only Apple can command a premium
An interesting point made by Apple Insider is that despite Samsung, apparently, selling more devices than Apple, it is Apple who earns the most money. In the just gone quarter Samsung earned half of Apple's profits despite selling more handsets. This is because Samsung sells more at the budget end of the market. It appears that only Apple can command the premium.
The competition would have a "hard time selling such a high end product, particularly at the same price," notes Apple Insider.
One reason why the competition will struggle, other than the fact that people seem more predisposed to spending more on Apple devices, is that where Apple's lowest priced MacBook is the 64GB MacBook Air (at £849), the competition tend to have lower price points on their laptops, and consumers are less inclined to spend more on a tablet, suggests that report.
Apple's iPad and Haswell
Speaking of the competition, they do have one thing in their favour, notes Forbes: "Haswell."
The Forbes report suggests that Apple's introduction of the 128GB iPad "is a defensive move against an onslaught by Haswell in the corporate market". That report notes that Haswell is expected to come close to the ARM architecture by ARM Holdings used by Apple iPads.)
Expect to see Microsoft launch a Surface Pro based on Haswell and similar offerings from the likes of HP and Dell. These will probably be hybrid tablet/laptops that will benefit from being able to run most of the programs that corporations use, writes Forbes. (More on that below).
Who is Apple's 128GB iPad for?
Apple made it clear in the press release that announced the new product which market it considers the device to be for. Apple's press release stated: "Companies regularly utilizing large amounts of data such as 3D CAD files, X-rays, film edits, music tracks, project blueprints, training videos and service manuals all benefit from having a greater choice of storage options for iPad."
MacNewsWorld observed that Apple felt a need to "break out facts about the iPad in business", suggesting that it was primarily talking to investors with the release. For example, Apple noted that "virtually all of the Fortune 500 and over 85 percent of the Global 500" are currently deploying or testing iPads.
iPad to replace the PC?
There is another point from the press release that MacNewsWorld picks up on. Phil Schiller said: "It's clear that customers around the world love their iPads, and every day they are finding more great reasons to work, learn, and play on their iPads rather than their old PCs."
Noting the reference to "Old PCs," MacNewsWorld speculates that part of the market for the 128GB version of the iPad is people looking for an alternative to their PC (or Mac).
Ex Apple exec Jean-Louis Gassée believes that there may be an issue with this plan.
He notes the following issues in his blog.
- I can’t open multiple windows
- I can’t select/drag/drop - have to switch between apps, select and copy a quote, and then switch back to the document and paste
- Adding a hyperlink is tortuous and confusing
- I can’t take a partial screenshot. I can take a full screenshot by simultaneously pressing the Home and Sleep buttons, and perform cropping and enhancing, followed by a Copy.
- Annotations? No known way.
- Control over the image file format? Same answer
- There’s no iPad equivalent to the Preview app
Forbes point about the laptop/tablet hybrids running the apps the corporations use is relevant here. As yet it is not possible to run Microsoft Office on the iPad so if Apple's large capacity iPad is meant for corporate users, then it is lacking at least one important feature, writes Forbes.
"Simply throwing storage at the problem is, clearly, not enough to make the iPad a 'Pro' device", writes Gassée.
Whatever these commentators think, Gartner is convinced that Apple has what it takes to be accepted by the enterprise, not just iOS but also the Mac as it takes on more iOS-like characteristics.
In a release that company states that: "By 2014, Apple will be as accepted by enterprise IT as Microsoft is today."
David Mitchell Smith, vice president and Gartner said: "Although Apple's mobile iPhone and iPads are already as accepted by enterprise IT as is Microsoft, Apple's Mac systems for laptops/notebooks and desktops remain not commonly accepted by IT. Going forward, Apple will continue to benefit from consumerization and will continue to evolve Macs to take on more iOS characteristics, which will contribute to acceptance of Macs in the enterprise. As such, enterprise acceptance of Apple will continue to be driven by consumer demand."