Just how big can the iPad market get?
As investors parse the rumors of a new mini-iPad launch from Apple this fall, that's got to be the main question. Apple is already selling a staggering number of iPads; 17 million last quarter alone.
For a little perspective, that's far better than Apple ever did with the iPod touch, which from my calculations topped out at about 10 million units in its best showing. It's just 6 million units short of the all-time quarterly record for all iPod sales, which stands at 22.7 million. And it's getting into the same territory as the all-time iPhone sales record, which Apple set in the most recent holiday season at 37 million.
So this is already a very big deal. And If Apple can use a smaller iPad to expand the market, the potential benefits are enormous. Even without a more affordable version on the market, the iPad could be on pace to contribute about $8 billion in the last three months of the year, assuming 75% annual growth. (Sales were up 84% in the most recent quarter, and 111% last Christmas.) Assuming a cheaper iPad wouldn't just cannibalize full-size iPad buyers, a mini iPad could add billions more to the top line.
Given the iPhone's 28 percent growth last quarter, it's a particularly important issue. Blame the law of large numbers, but the iPad just isn't growing like it used to. And now that Apple's the most valuable company in the world, with a market cap north of $630 billion, some investors have a hard time believing Apple's still got a lot of room unless you hit them over the head with an eye-popping growth number now and then. The product most likely to produce such a number? The iPad.
That's partly because the iPhone will never be an impulse buy for most people, who have to sign up for a pricey wireless contract when they buy the gadget itself. Yes "everyone" needs a cell phone, but just one, and just once every couple of years, thank you very much. iPads are different. There's no wireless contract required. Once they drop down to $300 or so — the territory where we should expect to see a 7- or 8-inch iPad go on sale — you can imagine getting an iPad for the living room, one for work, one or two for the kids, etc. Whole different ballgame.
And at that point, the iPad species would become an existential threat to the PC industry like never before. Sure, we'd still need PCs for typing term papers, editing feature films, and coding the next great operating system. But how many of us do any of that heavy lifting on a daily basis?
Eddy Cue, the Apple exec in charge of iTunes, may have put it best when he said in an internal missive early last year that he "found email, books, Facebook and video very compelling" on a 7-inch screen. The one thing he didn't think was so great? Web surfing. That sounds like it could be a problem until you remember that Apple once introduced the iPod nano, a smaller iPod that was sleeker and more portable but didn't have nearly as much storage as the other iPods. Or the MacBook Air, which was sleeker and more portable but didn't have as much storage as the other laptops.
The nano became Apple's top seller. The Air became the design benchmark for the rest of the laptop line. Apple's got to be hoping a smaller iPad could pull off a similar feat.