Apple's iPad mini: What the analysts are saying - updatedOctober 24, 2012: 10:40 AM ET
A bit of sticker shock and disappointment with last quarter's iPad sales numbers
FORTUNE -- Some 700 analysts and press representatives filed into San Jose's vintage California Theater Tuesday for Apple's (AAPL) latest reveal. There were several new Macs and a updated full-size iPad, but the star of the show was the device Apple called, as expected, the iPad mini.
Below: A sample of the analysts' reactions. We'll add more as they come in, with the newest notes on top.
Goldman Sachs' Bill Shope: iPad mini arrives; product cycle cadence could be changing. "The iPad mini's features were largely as expected, but the starting price point of $329 was a little higher than our $299 expectation. Considering Apple was having little trouble competing against lower-priced tablets without the iPad mini, however, we view this as a very mild disappointment. Apple also announced that it sold its 100 millionth iPad two weeks ago, suggesting that September quarter iPad units came in closer to 15-16 million units versus our 17 million estimate. Nevertheless, this shortfall was at least partly due to channel drawdown ahead of the fourth-gen product release, which we had not anticipated in our model. We do not believe this signals any change in the strong demand trends for the iPad, and much of this will likely be made up by fourth-gen iPad channel fill in the December quarter."
J.P. Morgan's Mark Moskowitz: iPad Mini Launch Encounters High Expectations. "On Tuesday afternoon, shares of OW-rated Apple retreated following the iPad mini announcement. We think the pressure was overdone. While the base model's ASP of $329 was higher than our estimate of $249, the base specs are better than expected. We think the iPad mini, coupled with the 4th-gen iPad, underscores Apple's accelerated refresh rate of important devices and software. With the iPad mini and the new 4th-gen iPad, we believe Apple does not plan to forgo the profitable parts of the lower-end segments in tablets. In our view, the larger screen size and iOS 6 capabilities of iPad mini stand to be good enough to grab share from the $199 tablet crowd."
Deutsche Bank's Chris Whitmore: iPad moves down market. "Pad mini pricing was a modest disappointment (most expecting <$300); but we expect strong demand as its rich feature set accompanies the higher than expected price... As outlined in greater detail in prior research..., the iPad mini addresses a new segment of the tablet market, but the $329 starting price is higher than we hoped. However, the feature set is also richer than we anticipated (16GB vs. expectation of 8GB) and the build quality looks and feels outstanding. Furthermore, the 275K existing iPad apps are fully compatible with the mini, allowing Apple to leverage its existing rich App ecosystem. Due to the high quality of the hardware, we expect the device will be very well received by consumers once they have an opportunity to test it."
Sterne Agee's Shaw Wu: Unveils iPad mini, new Macs and iPad. "This isn't the first time many have questioned AAPL's premium pricing strategy. We have seen it with the iPhone, iPod, Macs, and even iPad. We would argue that AAPL has a strong track record in pricing to optimize volume and profits unlike most competitors who need to price low to have a fighting chance. We continue to believe iPad mini is the competition's worst nightmare and likely to drive incremental volume. Many forget that $329 is still a more attractive price than $399 of iPad 2 and $499 of iPad. We believe some customers considering a Nexus 7 or Kindle Fire HD may consider iPad mini instead. Keep in mind that competitors have a tough enough time competing against higher priced iPads and we think iPad mini that is $70 less will make it even more difficult."
Baird's William Power: iPad Mini Official - Positioned for a Strong CQ4. "Pricing for margins. The starting price of $329 is slightly above our $299 expectations, though appears to be supported by the strong features and capabilities relative to 7 inch Android devices in the market. Specs solid. The mini sports a 7.9" display, dual-core A5 processor, LTE connectivity, and has cameras on the front and back of device. Competitive positioning strong. Though priced above the Nexus 7 and Kindle Fire, the device in thinner, lighter, boasts a bigger screen and better cameras, and of course benefits from the much wider app. selection. Sprint added as U.S. iPad carrier. Apple added Sprint as a carrier option for both the iPad mini and the 4th gen iPad.
Gabelli's Hendi Susanto: Mini iPad Opens New Markets and Applications. "We believe the new mini iPad's revenue opportunity outweighs the potential cannibalization of iPad and iPod Touch. Despite of the price difference, we think the mini iPad offers competitive edge, including Apple's software ecosystem platform, and can win against low-to-mid end tablets, especially in the $200-300 tablet space. We believe the mini iPad will draw successful sales in emerging markets, including China. We still think mini iPads will have the ability to open up new market opportunities such as portable automobile media consoles, navigation systems, and portable video game consoles."
Wedbush's Scott Sutherland. iPad Mini Introductions Accompanied by Other New Products and Stats. "The new iPad sports a 7.9" screen and will be priced starting at $329 for 16 GB and $459 for the cellular version. While this is higher than most expectations, which pegged pricing at $299 or lower, given the slightly larger size than 7" tablets and design, the display area is 35% larger. While pricing may provide some breathing room for lower-priced competition at the $199 level, this in general should increase the competitive stakes against competitive solutions from Google, Android vendors, Amazon, and RIM. We believe this could essentially be another nail in the coffin for the Blackberry PlayBook. Overall, we believe this is a positive step for Apple as we believe screen size and form factor should be up to the consumer and see a range of tastes for screen size. This should not only lead to incremental revenue, but also put the pressure on competitors."
Credit Suisse's Kulbinder Garcha: A compute portfolio for all. "We forecast the tablet market to rise to 112mn/171mn units in 2012/2013 and triple to 371mn long term (accounting for nearly 50% of compute volumes). The refreshed iPad portfolio cements Apple's competitive positioning, and we increasingly see the company sustaining a 60% share in the segment given 4 factors: (1) a superior compute experience across smartphones, tablets and PC's; (2) a tablet product portfolio that addresses all price tiers; (3) a disproportionally high share of usage, aided by a strong apps ecosystem; and (4) structurally higher GMs than peers given the leverage from component reuse and scale."
Canaccord Genuity's Michael Walkley: Apple launches iPad mini. "We believe the iPad Mini has raised the bar relative to lower-priced competing tablets with impressive hardware specifications, competitive pricing, and the leading software ecosystem that includes over 275k iPad-specific applications... In addition, we believe Apple's pricing of the iPad Mini ($329 for WiFi-only, $459 for 4G base models) will enable Apple to maintain dominant share of the growing tablet market by providing better hardware and a much more integrated and robust user experience at competitive pricing versus lower priced competing tablets."
CLSA's Avi Silver: Size matters. "The 7-8" tablet market is poised to accelerate with very attractive price points and impressive product roadmaps. We estimate the 7-8" tablet market at 71m units (total 173m) for C2013 and conservatively estimate Apple's market share at 48% of this market. We introduce iPad mini estimates of 7m in C2012, 34m in C2013, and 49m in C2014 with ~25% 10" cannibalization factored into our model. A greater cannibalization effect is possible but that would likely be accompanied by much higher 8" iPad mini volume – potentially reaching 100m units in 2-3 years."
Cowan's Matthew Hoffman: New iPad mini To Defend Tablet Share. "We view the iPad mini as an important defensive measure to help protect Apple's still-dominant share (~67%) of the global tablet market. We model the iPad mini as largely cannibalistic for now - taking unit share from the iPad, but also holding off the advances of lower-priced (largely Android) competitors like Amazon's Kindle Fire HD. We will be watching for signs the mini's lower price points grow Apple's TAM, possibly becoming a positive F1Q13 catalyst."
JMP's Alex Gauna: We See Elevated Near-Term Trading Risk. "Shares of AAPL traded off over (3%) on the development, as investor sentiment seemed to swoon at the entry level pricing of $329 for the iPad mini that puts it well above some of the closest competing options. We agree that risk has modestly intensified around the iPad portion of the AAPL investment proposition, and we also see near-term trading risk/reward arrayed to the downside ahead of its F4Q12 earnings report scheduled for AMC on October 25. Our Market Perform rating is based on our view that current earnings expectations and trading levels at ~13x PE/CY13 strike an appropriate balance between the upside potential of the next iPhone and downside risk from competitive encroachment and margin capitulation."
Needham's Charlie Wolf: The new iPad Mini soars above the competition. "Starting at $329, Apple left a modest price umbrella for competing 7-inch tablets. However, none can compare with this device, in our opinion, which is a fully featured iPad except for its size. All 275,000 iPad applications can run on it without modification. The iPad mini may cannibalize some iPad sales. But it should greatly expand the market for iPads, which Apple reported passed the 100 million unit sales mark two weeks ago, just 2 1⁄2 years after its introduction."
RBCs Amit Daryanani: iPad mini and more. "The device is slightly larger than Android tablets in market it is also substantially thinner and lighter. The Mini weighs in at 0.68 lbs(53% lighter than iPad Gen 4) and is 7.2mm thick. Pre-orders begin Oct-26th with shipments on November 2nd. Pricing begins at $329 (16GB) moving-up to $429 (32GB) and $529 for the (64GB) model. We estimate AAPL could ship 6-8M iPad mini's adding $2-2.5B in revenues. Also, much of the guts of the iPad mini from iPad 2 implies Bill-Of-Materials may be lower."
Evercore's Rob Cihra: Mini iPad but Big Markets. "We see smaller size and price helping set Apple up to both a) expand and b) capture even greater share of the thin-client tablet market it pioneered. Shipping starts Nov 2."
Morningstar's Brian Colello: Apple's iPad Mini: Pricier Than Expected. "At first glance, the form factor and specifications, such as the use of an older A5 processor and a non-retina display, were consistent with our expectations. However, we're a bit disappointed at the starting price point of $329, as we fear that price-sensitive consumers may continue to turn to alternative tablet solutions, such as Amazon's (AMZN) Kindle Fire and Google's Nexus tablet at $200 price points."
Morgan Stanley's Katy Huberty: Broad new product line-up for the holiday season. "Both the iPod mini and iPad mini launched roughly 2.5 years after and at a 17% discount to the iPod/iPad. In other words, Apple has experience extending a product line to a smaller, cheaper form factor... Many may question the logic of refreshing iPad less than a year after the last update, but it makes sense for three reasons: 1) Leaving a stale product in the market increases cannibalization risk from the lower priced iPad mini. 2) The New iPad did not sell as well as expected in light of limited feature upgrades versus iPad 2. Doubling CPU performance with the A6 chip partially addresses that issue. 3) Apple refreshed the legacy iPod when it expanded to smaller form factors (e.g. mini), which accelerated growth."
Janney's Bill Choi: iPad Mini Doesn't Have to Compete on Price. "The highly anticipated iPad mini was announced at a $329 entry price point, which was largely in line with our expectations. At this price point, iPad mini targets the incremental opportunities for smaller tablets (e.g., 6-16 year olds and women) without disrupting existing product line-up in iPad and iPod Touch. We don't think Apple needs to compete aggressively on price against mini-tablets from Android; Apple continues to sell a premium product in the fast growing tablet market at premium price points."
Oppenheimer's Ittai Kidron: iPad mini Joins the Family; iPad Disappoints. "As expected, Apple introduced its new iPad mini, which we see as a good addition priced just low enough to squeeze competition and strengthen Apple's hold on tablets, although we did hope for a below-$300 price tag. The introduction of a 4th-gen iPad was more of a surprise, and while it could annoy some recent buyers, it could likely help minimize iPad mini cannibalization. Apple's cumulative shipment comments suggest Sept. iPad units were a bit light (~15M vs. our 18M), but with the near-term release we see a smaller likelihood of a pre-release lull in demand. We're adjusting our estimates accordingly. Our thesis is unchanged, we see ample room for iPhone/ iPad growth and would buy on weakness."
Topeka's Brian White: mini Mania Begins. "The iPad mini was the star of today's show and we believe the product will be an absolute homerun for Apple with the 7.9 inch display, 23% thinner than the iPad fourth generation and 53% lighter. Prices begin at $329 for the 16GB iPad mini Wi-Fi version and starts at $459 with 4G LTE. We played with the new iPad mini today and it felt every bit as good in our hand as we had expected, especially with the more refined aluminum casing that includes the colors of the iPhone 5 (i.e., black and slate and white and silver). The device comfortably fits in one hand and can be carried in our sport coat pocket as we previewed during our recent Asia tech tour. ... We have no doubt the iPad mini will be a favorite this holiday season and we continue to estimate that Apple will sell 5-7 million units in the December quarter, held back by supply constraints. Next year, we believe the iPad mini will take off like a wildfire and eventually surpass the iPad in unit sales over the next couple of years."
Jefferies' Peter Misek: iPad mini Likely Holiday Top-Seller."We were particularly impressed with the mini's Retina-like 8" screen and lightweight design. The display density of 190ppi compares to 132 for the iPad 2, 264 for the iPad 3, and 216 for the Nexus 7 and Kindle Fire HD. Apple stressed that the 7.9" screen size provides 35% more area than the 7" Nexus. Also, the mini weighs 0.68 lbs vs. 1.44 lbs for the iPad 3, 0.87 lbs for the Kindle Fire HD, and 0.75 lbs for the Nexus 7. The $329 starting pricing was higher than our estimate of $300 and implies a mid-30%s GM vs. our prior estimate of ~30%. We believe that the iPad will do particularly well as a holiday present and as an educational device."
BMO's Keith Bachman: More than just a little. "We believe the iPad mini is competitively priced, although we would have liked to see modestly lower price points. The iPad mini with 16GB WiFi is $80 more than the Google (GOOG) Nexus and $115 more than the Kindle Fire HD (without ads). However, the iPad mini has an 8" display versus 7" for the Nexus and Fire. Apple indicated 100 million iPad units have been sold to date, implying around 16 million units for the September Q versus our 18 million unit estimate. We note that Apple generally rounds total numbers, and we would not put too much emphasis on the announced figure. Moreover, Apple has historically reduced channel inventory ahead of product launches (March 2011 with iPad 2 and March 2012 with new iPad), and we would not be surprised to see Apple reduce inventory levels before the fourth generation and new iPad mini releases."
Merrill Lynch's Scott Craig: iPad mini: Apple's foray into smaller, low-end tablets. "iPad mini validates the opportunity in smaller form factor tablets and should further intensify competition in the low-end segment. The pricing is slightly higher than expected at $329+, but it's reasonable to assume that the iPad2 will likely be phased out at some point. iPad mini helps expand Apple's opportunity in the tablet market, and its media ecosystem positions the iPad mini well vs. low-end tablets. This could be a great holiday seller and provides some upside, likely small to our unadjusted model."
Nomura's Stuart Jeffrey: iPad Mini: Fresh, but Not Wild. "We think the new products are exciting on a standalone basis, but all could also be described as incremental improvements. We see limited impact on earnings estimates, as both the nature and price of the product announcements broadly met expectations... In our view, Apple made a successful attempt to justify why the iPad mini deserves a premium. Examples include 35% greater screen area when browsing in portrait mode and 67% more when in landscape mode; access to 275,000 iPad-specific apps when Android tablets are still largely reusing smartphone applications; and the use of more premium materials. However, a 65% price premium ($129) is significant and, we believe, allows for Amazon and Google to continue to build out their positions. This, in turn, should encourage more tablet-specific Android application development and thus narrow the gap with the iPad over time."
Piper Jaffray's Gene Munster: iPad Mini Confirms Our Belief In iPad As Bigger Part Of Forward Story. "We believe that the main feature of the new iPad Mini is price, followed by size. While some investors may claim this is a departure from innovating on technology for Apple, we believe it is how Apple furthers markets in which it is dominant, using the iPod as a historical precedent. The base iPad Mini will cost $329, slightly higher than our expectation, but the higher price does not impact our thoughts on consumer demand for the iPad Mini. Additionally, we note that Apple announced iPad sales data that implies iPad may have been weaker than expected in September. The data suggests around 15m units in September compared to our prior 18.5m estimate."
Barclay's Ben Reitzes: It's up to Apple to expand the total addressable market. "We believe that the launch of the iPad mini was line with expectations, with the features and pricing as anticipated. We were hoping the mini could be priced at least a little lower given its competition is situated as low as $99, with many starting in the $199-$249 range. That being said, Apple seems convinced that consumers want the iPad and its ecosystem, which has worked so far at the high-end. We believe Apple can sell 5-10 million iPad mini's in the December quarter while cannibalization of the other iPads will likely run at 25-50%."
FBN's Shelby Seyrafi: AAPL iPad Mini Launch. "In spite of concerns about the price and fast next-gen iPad roll-out, we would be buyers of the stock even in front of earnings this Thursday as we do believe that customers will pay a premium for an AAPL tablet and the company now has a rather strong iPad cycle in front of it."
Global Equities' Trip Chowdhry: Quick Take. "Key take aways: Innovation at Apple is over... Just incremental improvements, nothing ground breaking. The best is over for Apple. iPad mini is playing catch up to Google Android, probably will have a mediocre customer adoption."