Here's Why The iPad's Dominance Is Not Going Anywhere
Yesterday I wrote about the iPad 2's dominance coming to an end thanks in part to the forthcoming Amazon (NASDAQ: AMZN) tablet, which many are expecting to be a monster hit, similar to its popular e-reader, the Kindle.
Not so fast, my friend.
BoyGeniusReport is out with an article today that Foxconn, the supplier for both the Apple (NASDAQ: AAPL) iPad and soon to be Amazon tablet, is expecting to ship 20 million iPad 2s in the third quarter. The report was first published in the DigiTimes. This is a massive growth rate from the second quarter, up 60%.
Originally, there were rumors that Foxconn would not be able to meet demand for iPad 2 shipments during the second quarter. It was expected to ship 2.5 to 3 million iPad 2's to Apple per month. With such a large increase over the second quarter in iPad 2 shipments, it does not look like the coming Amazon tablet will affect demand, at least in the short term.
Additionally, there are also reports that Apple will be coming out with a third version of its popular tablet, with a higher resolution display and similar screen size. According to a Wall Street Journal report a few weeks ago, the resolution on the iPad 3 will be 2048 by 1536, compared with 1024 by 768 in the iPad 2. Apple has already placed parts orders for 1.5 million iPad 3s in the fourth quarter of 2011, or Apple's first quarter. The iPad 3 is expected to come to market in early 2012.
For over ten years now, Apple has been a company that can do no wrong. The iPod. The iPhone. The iPad. While Amazon entering the tablet market may give Apple a legitimate competitor in the space, Foxconn shipping 20 million iPads this quarter says that Apple is not seeing any drop off in demand any time soon. In fact, it would not be surprising to see Apple sell even iPads during the holiday season, as everyone and their brother wants an Apple box for the holidays.
The Apple halo effect is so strong that it was able to become a leader in a market that languished for years until the Cupertino-based company entered it. With over 90% of the market share in tablets, Apple's dominance is unquestioned. This does not sound like a company that is going to lose dominance anytime soon, does it?
In the last quarter, Apple sold 9.3 million iPads. Applying the same 60% growth rate, Apple would sell 14.9 million iPads in the current quarter. That is unbelievable for a product that has only been around since March. Steve Jobs, Tim Cook, and the rest of Apple's team have shown that they have the ability to dominant markets and never let up their strangle hold. The iPod is still the most dominant selling MP3 player. While the iPhone competes against Google's (NASDAQ: GOOG) Android operating system, it outsells any OEM designer by a large margin.
Jobs is the greatest salesman of the 21st century, and losing him as your CEO may eventually hurt. Tim Cook as his replacement has proven to be more than adequate, using Apple's massive cash hoard (some $76 billion and growing daily) to secure parts and deals for its iconic products.
A 60% quarter-over-quarter growth rate is pretty indicative of being the unquestioned market leader for quarters, if not years to come.
Sorry Jeff Bezos.
Traders who believe that the iPad will continue its dominance for a longer period of time than most expect might want to consider the following trades:
- Go long Apple. It is trading at around 14 times 2012 earnings, extremely cheap for a company growing nearly 100% year-over-year.
- Also consider Apple suppliers, such as Qualcomm (NASDAQ: QCOM), ARM Holdings (NASDAQ: ARMH), and Broadcom (NASDAQ: BRCM).
Traders who believe that Amazon will take more market share than others expect may consider alternate positions:
- Amazon should benefit, as the tablet is contingent on users going to Amazon's site and buying products from Amazon.
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