Apple's Television Will Sell Faster Than the iPad
Hedge fund manager makes bold call on Apple's long-awaited television set.
This week, Apple (NASDAQ: AAPL) CEO Tim Cook explained how each major product sells faster than the last.
"We've now -- through the last quarter, I should say, which is just two years after we shipped the initial iPad -- we've sold 67 million," Cook said during Apple's Tuesday conference call, as quoted by Macworld. "To put that in some context, it took us 24 years to sell that many Macs, and five years for that many iPods, and over three years for that many iPhones, and we were extremely happy with the trajectory on all of those products."
Eric Jackson, the founder and managing member of Ironfire Capital (a long/short and corporate governance-focused investment firm), expects that trend to continue with Apple's first television.
"We live in this kind of sped up world," Jackson told Benzinga. "The user base is there for Apple. When new, complementary devices get introduced by the company, the pickup is so quick. I think iTV is going to be even faster than the iPad. It's gonna be, potentially, a pretty phenomenal product launch next year."
Jackson said that he expects Apple to release its first television during the early months of 2013. "I think it'll be a big seismic shift in the world of TV," he said. "It's going to have ramifications to Netflix (NASDAQ: NFLX) and the cable companies, so it's going to be a pretty big event."
Jackson, whose firm owns 10,000 shares of Apple, anticipates other product launches as well. "I'm sure that there's other stuff planned," said Jackson. "These are guys that think at least 10 years ahead. They are all business. They're just executing. They're not stopping to invest in asteroid colonies or goggles or driverless cars or spending 16 board meetings to think about a triple-class share structure. They are just, 'we're gonna eat your lunch,' and just execute, execute, execute. It's a beautiful thing to watch as an investor."
One Model, One Price
While most people speculate that Apple will release two or three TV sets, each at a different size and a different MSRP, Jackson thinks that the Mac maker will employ a simpler strategy.
"I think it's gonna be just one size," he said. "That kind of fits in with their focus on having one new product and marketing that and selling the hell out of that before they get into different sizes."
Jackson estimates that the TV will be somewhere in the 40- or 50-inch range and cost between $1,000 and $2,000. "Probably closer to $2,000," he said. "But I wouldn't rule them out pricing it closer to $1,000 because I think they see this in the same light that they viewed iPad, where they took an aggressive pricing approach and knew that they couldn't be matched from a supplier cost perspective, and therefore knew that the other competitors would be killing themselves for the next five years trying to compete and losing money while they're at it."
But even if the TV is sold for $1,000, Jackson still believes that Apple will get great margins. "If it's at $2,000, that will easily match or beat what's currently out there," Jackson affirms. "Samsung has these Smart TVs that are Internet-connected, and I think they're going for over $2,000.
"The margins [on Apple's TV] will be good. I think it will have Siri. I think it will be even more plugged in and connected to your other devices than the current Apple TV [set-top box]. I think the current version of Apple TV will be their answer to having people who want to use [something like that] on a smaller TV or a bigger TV.
"And I think business will be a huge market for [the actual TV]," Jackson added. "People will use it -- it will be kind of a new version of a flip board or white board in a lot of business conference rooms."
With regard to Apple's estimate-crushing Q2 results, Jackson said that he thought Tim Cook used a good word to describe the situation: mind-boggling.
"I thought it was a great quarter," said Jackson. "A couple key takeaways for me were obviously the importance of international growth, which I think has been underappreciated for two years now. I think what also struck me was the iCloud numbers -- the fact that they already have 125 million subscriptions already. These are the kind of rabid Apple (NASDAQ: AAPL) users. I assume they have multiple devices. I assume [they'll be] first in line to buy the next version of the iPhone and iPad when they come out, and iTV, eventually."
"That's going to be an interesting number over time," Jackson added. "It kind of suggests that this is the user base that will never switch to Android, will never switch to another platform, and it's just going to keep growing over time."
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