Barclays Capital analyst Ben Reitzes said in a research note “that Apple’s fiscal fourth quarter iPad sales of 11.1 million was weaker than the 11.7 million expected by analysts,” Larry Dignan reports for ZDNet. “Apple channel inventory was up 1.45 million units to 2.5 million. As for the first quarter, Reitzes said ‘we currently estimate iPad unit sales of 13.9 million for the December quarter, which may prove optimistic by 1-2 million units.'”
“It’s time for ‘pricing stimulus,’ said Reitzes. Apple may simply need to cut the price on the entry level iPad. If $200 is the new benchmark for tablets and the [Amazon Kindle] Fire takes off — it just might — then Apple’s iPad will look pricey,” Dignan writes. “Frankly, it’s amazing that Apple has been able to hold iPad pricing this long as rivals repeatedly stumble. Apple will keep the high-end and Amazon will take the low end. Can Apple really afford to cede the low end of the market to others? I’d argue that Apple will have to dabble in the low end just like it does with the iPhone. Apple price cuts — if they are coming — would land in just a few days.”
Read more in the full article here.
Rick Aristotle Munarriz writes for The Motley Fool, “The unthinkable is happening at Apple. The class act of Cupertino may have priced its iPad out of the market this holiday season. Goldman Sachs analyst Bill Shope is advising clients to keep an eye on iPad sales this quarter, fearing that the company is facing some near-term demand challenges for its iconic tablet. He argues, and rightfully so, that Apple is long overdue for a price cut.”
Munarriz writes, “The funny thing is that the carrier-subsidized iPhone is reasonably competitive to Android handsets, and it’s still losing ground to Android. Why can’t this play out with tablets?”
Read more in the full article here.
MacDailyNews Take: Dear analysts, do us all a favor and hold your breath waiting for your “iPad price cuts,” please!
You’d think that by now they’d have at least an inkling of how Apple operates. If they’re “analyzing” Apple, can you imagine how little they know about everything else?
[Thanks to MacDailyNews Readers “GetMeOnTop,” “JES42,” and “John A.” for the heads up.]
Apple’s iPad is the number 1 product on the market leading by miles. Apple is making money on the product where others are not. Why would Apple need to cut prices? Absurd!! If there was some competition to the iPad that actually was a threat, then maybe but there’s not.
Last time I checked, the iPad still has no real competitors in the 10″ screen size and when it came out just a year or so ago, the price was far below anything else. The Kindle Fire has half the screen size, limited funcionality and poor reviews. How is this considered a competitor for the iPad which is more of a inexpensive laptop replacement?
As usual, the analysts should stick to trying (and failing) to predict earnings and not comment on how Apple or other companies run their business. They are even more wrong and misguided on business issues than their main job of predicting earnings.
BS. They are basing this claim on nothing more than Apple “missing” targets set by analysts for iPad sales, and that the Kindle Fire is priced at $200. The Fire can’t do half of what an iPad can do, and the reviews are about as bad as the PlayBook (gee, maybe Amazon using RIM’s leftovers wasn’t such a great idea?).
Apple has no need for a big price cut. Maybe it will keep the iPad 2 as an entry level model at $300-$400 once the iPad 3 comes out this spring. But seeing as Apple sells just about every iPad it can make, no price cut is needed.
Wrong. iPad is priced perfectly. The competition can’t get a similarly sized product close to it.
This “Aristotle” Munarriz is an embarrassment to his namesake. Apple has the largest economies of scale for tablets and it knows precisely how much it can charge for a high-quality tablet. A 9.7″ display is twice as large in area as a 7″ display and the costs go up accordingly. The Kindle comes with 8 lousy GBs of memory and the iPad starts with twice as much memory. The Kindle battery life is nothing to rave about. Scrolling and pinching to read a magazine and saying it makes for a great reading experience is absolutely fraud. Amazon is happily willing to lose money on every Fire unit sold. What type of customer support is Amazon offering to Fire purchasers?
Analysts trying to push that $200 is the optimum price for a tablet is pure bullsh!t. They’re either lying through their teeth or stupid beyond all reason. They’re basically trying to devalue Apple’s quality standards and share price at the same time. Their views on comparing Amazon to Apple are just sickening. I’m telling you that these people actually believe that Amazon is a better run company than Apple and for the life of me I don’t see how that can possibly be.
Remember how shocked everyone was in January 2010 when SJ announced the iPad would start at $499 rather than $999?
Who can, succeed. Who can’t, be an analyst.
The Fire is getting poor reviews so the only way I see something like this happening is for them to sell the iPad 2 at a lower price when the iPad 3 is introduced.
Except if you look on Google News, where the headlines are about all the “positive” reviews for Fire. For some reason (cough), the headlines at Google News feature often pair negative iPhone/Apple stories with glowing stories about the latest Android offering.
The dirty dogs
All of their BS serves to hold AAPL back in the market. They do know something after all. :-(.
Apple sells 95% of some number made up by anal-cysts, and the sky is falling?
Can I get a reality check here?
I helped my mom shop for an e-reader last week. She had seen the Kindle ads and heard about the iPad. The e-ink display on the single-function e-readers was a big selling point, but I was amazed by how strongly she was drawn to the iPad for its seamless beauty. She seemed to be hypnotized by it. I convinced her, that for traveling, a lower-cost device would be less risky for her. Although I would’ve loved for her to get the iPad. She would’ve spent the money if the other factors (sheer value of the device and its glossy screen) weren’t a concern.
So you went shopping with your mom, and convinced her not to buy the product she instinctively knew to be better. Her convincing was based on the FEAR of traveling with it?
Some son you are, “less risky” what a crock.
This is a strange anecdote…
Price cuts for no reason. Brilliant Analyst thinking. The IPad is still the only game in town. Should the most valued company in the world reconsider what has made them an ubersuccess and take the advice from these clowns who have never run a business in their life?
“The Fire is getting bad reviews,” LOL.
MDN picked the few harsh reviews they could find out of hundreds that are now posted across the internet. And just like I suspected, the lot of you swear the Kindle Fire a failure.
You’re in for a big surprise when you peek outside the RDF bubble and begin to see the Kindle Fire toted around with iPad-like ubiquity. It is not going down in flames no matter how much you wish it. People are stupid and they’ll gladly eat garbage if they can get it for cheap.
The Fire is not a full-tablet experience. It will work well for Amazon Prime users that want to consume that content. It will work well for those that don’t know any better. It will be in tough when Amazon tries to compete with a 10″ tablet and when Apple releases an iPad mini aimed mostly at those wanting to spend less and the gaming market.
The only thing it has is the price point. It’s a choppy experience at best.
I agree with you. However, Apple should not underestimate the ability of the Kindle Fire to change the tablet landscape SIGNIFICANTLY — I believe it has real potential to do so. Here’s how. As you mention, the Fire is not really a competitor to the iPad — it’s not really fully functional as a multi-purpose tablet. But it most definitely will be the target of every other Android tablet after next week. As we are already seeing, it will put downward pricing pressure on the general purpose Android tablets in the market (i.e., Galaxy Tab, Zoom, Transformer, and whatever HTC introduces next). These tablets do have the hardware to compete with the iPad right now. The thing holding them back is software. But in only a few months, the majority of them will have Ice Cream Sandwich. Whether or not this will compete better with iOS on the iPad is certainly debatable. But it will most certainly unite phone and tablet experiences on the Android side of things. The primary impact this will have is that you will see an explosion of apps that run very well on an Android tablet. This has been one of the real downsides to an Android tablet currently. With this hurdle removed, you will see several fully-featured tablets that are capable of competing with the iPad. They may not be as good, but they will be good enough in the mind of most consumers. And with the downward pricing pressure applied to Android tablets by the Kindle Fire, Apple could really see an impact to their dominance with the iPad. Just like with phones, you’ll see Android start to overtake the market. This is due simply to mass availability due to so many different hardware manufacturers. By summer, I’m betting you’ll finally see Android tablets take off in a way that they haven’t yet been able to do so to date.
So, Apple, what are you going to do? The fanboys on this site are in denial. But Apple is smarter than that. They’ll either introduce new tablets with killer features, lower the price of current tablets to compete better with the ensuing Android onslaught, or innovate in some other way that we don’t yet anticipate. Interesting times ahead indeed.
I agree with Rick on the point that we should always watch out for the trojan horses. Yes, everything Apple touches is like magic and cannot be beat ( currently). Yes, its always been a time to celebrate. but never ever underestimate the enemy. That is proven wisdom, seen time and time again in history. The Romans? Troy? (many others but i haven’t had my coffee yet so forgive me).
However I don’t think Apple should lower prices to compete. I don’t think they ever have, and if they do people will just expect it, and that is no good. It took me a long time to to save up for my 2011 iMac. It never went on sale, and I didn’t think it would. The only thing I had to consider was when to buy when I had the money, because of product launches. My 2004 iMac with ram upgrade was 2300CAD, and 6-7 years down the road I was willing to pay that again, regardless of the junk Walmart sells for 200CAD . Id of taken another year to save up for a new iMac if I had to.
MacDailyNews Take: Dear analysts, do us all a favor and hold your breath waiting for your “iPad price cuts,” please!
🙂
Better yet, please put a plastic bag over your heads and secure it tightly around your neck with tape.
id love a price cut since im about to buy but is it needed for Apple? I don’t see it. they could technically charge more and still not meet demand.
Yet again, all these analysts look at is numbers of units. They get swayed by the shipped numbers of other manufacturers, forgetting that they haven’t actually sold them. Now they assume that selling more of something is automatically better even if you have to cut the price and thus make less money per unit as a result.
These figures are plucked out of thin air, but say they make $200 on each iPad, if they were to cut the price by $100 they would have to sell double the amount to make the same money they were making before. Even if they were making more than that, and/or reduced the price by a lower amount, the point is still the same – sales would have to be increase by an unrealistic amount for no real benefit. As it is they’re pretty much selling them as fast as they can make them so even if that massively increased demand was there then they probably couldn’t supply it anyway (not straight away) so they’d have shot themselves in the foot.
Other manufacturers selling at lower prices are not making money partly because they’re not selling many, but even if they did, the profit per unit would still be tiny. This is why apple makes so much money, they’ve not been driven to the bottom.
Yes, they did reduce the iPhone price to start with, but that was when they were new to the market, in many ways they were creating the market so were just recalibrating to find the sweet spot between profit and sales numbers.
It’s a good thing kids waiting for Santa to bring them an iPad don’t read analysts’ BS.
Dear MDN,
I am a regular reader of this site for years and I always love yGour “MDN Takes”!
BTW, who are you, anyway? Are you one person? A staff of 10?… 100?…
Reveal yourself to the adoring masses.
– Dogadoga
So Apple’s running up inventory in the lead up to Christmas?
Sounds like a good thing.
And 2.5 million isn’t much when you’re selling as many as they are.
Much more likely that Apple releases an “iPad mini” or basically a 7″ iPod touch (basically the same thing!) to further dominate the tablet and gaming markets. I’d imagine it would be priced at $250 – $299 which would kill the Fire.
Apple’s iPad at $499 is very competitively priced compared to other brand 10″ tablets.
Want crap? Buy cheap.
Want quality, style and beauty? Buy iPad. Still a steal at current prices.
I’m not a cheapskate and I do not like crap being foisted upon me by some two-bit analysts. Jeff Bezos now has all those Kindle Fire buyers in his pocket. If Apple had done that, there would have been cries of “bloody walled garden” ringing from the rafters. But with Jeffy boy running the Amazon asylum it’s how he’s doing everyone a great service by limiting their options and shielding them from the whole confusing mess of Google’s Android Market.
Selling the Kindle Fire for $199 is just smoke and mirrors to trick consumers into thinking they’re getting a great overall deal. Whether it actually turns out to be true, only time will tell. If consumers are satisfied then Amazon may have found an answer to selling low-cost tablets. I only know that I’m not in the market for such a mediocre product when there’s something out there better and well within my budget.
As Steve had said, “He didn’t know how to build a tablet for less than $500 that isn’t crap.” I think Apple could probably build a tablet for $450 that isn’t crap, by now, but I’m sure Apple doesn’t want to lose those margins. If I was a consumer with shallower pockets, I probably just buy a refurbished iPad and that would satisfy me. I want the iPad’s ecosystem and customer support and I’m willing to pay for it. I don’t want any device that runs that Android OS.
We had 2 iPads and then upgraded to 2 iPad 2’s this year. Our 4 kids (ages 10-14) each have asked for an iPad for Christmas. In fact, for the boys, that is the only thing they really want. However at $500 a pop, that’s not gonna happen. Therefore, none of them will get one. My wife suggested getting them the Kindle Fire and I absolutely refuse to go that route as I know the kids would be disappointed after using our iPads.
A Price drop of $100 would make me change my mind though, so I (and I’m sure many other consumers) would be all for it.
Who are these bafoons who claim to be analysts? Seems to me Apple, which has ignored every person, analyst, and etc regarding how to run the company and how to price its products and has done very well… better than anyone even! Dilute the prices of something just to try to get more people to buy dilutes product value, perceived and otherwise… why have narrower profit margins just so a few more people can have these devices? These same idiots probably are running the usa’s finances, or ran companies and businesses into the ground, and are looking to parasite off something good
Actually the analysts are right if (and only if) you ignore the fact that Apple will continue to innovate. If Apple’s innovation stagnates, the analysts will be dead on. But we know that Apple has a habit of innovating and changing the course of technology history.
Very true.. but the scary thing is that such innovation gets harder each time, especially when people constantly start rumours of what the next product will be like and feature, which inadvertently sets a stage which can cause disappointment at a product release. Even the great Empire of Rome couldn’t live up to expectations eventually and look what happened. I support and love Apple because I have learned from experience how better everything is, and my life has become easier and honestly a bit better ( saving time and money) … but I know that there could be a fall eventually. I hope not in my lifetime. But if and when it happens, when those dumb sheep who ignorantly bash apple and the users/followers of apple, come mocking and bashing us all, I.. we… can laugh back at them for all the misery they self-inflicted by using inadequate soft/hardware in their life 🙂
Yep, Apple doesn’t know what it’s doing. They’ll only sell 15M iPads this quarter.
There is no threat from Amazon. Fire will be huge dissaster for the Amazon because Amazon loses money with every single Fire that they sell. Amazons margins are razor thin and they can’t handle high return rates. It will also take too long time to recover the losses with other sales. I really wouldn’t bet that horse.
We already got the answer how the Fire is going to sell from now on..
“When stacked up against other popular tablets, the Fire can’t compete. Its performance is a occasionally sluggish, its interface often clunky, its storage too slight, its functionality a bit restricted and its 7-inch screen too limiting if you were hoping to convert all your paper magazine subscriptions into the digital ones. Other, bigger tablets do it better… “
Last quater revenue 10,876 Billion dollars and net Income 63,00 Million dollars. Razor thin margins as I said.
If it works poorly, you will return it or never pick it up. If you return it (as many will) then Amazon must refurbish it and try to sell it again. If you buy it and never use it then Amazon has lost money with your Fire. Margins are so tight with Amazon that even if they double their revenue to 20B they still wont make much money out of it.
They are also trying to compete with Apple’s online stores that can provide much better experience even though you can’t buy your paper goods from there.
With this rate they have to sell 5000 dollars worth of goods to every person and for every 100 dollars spend subsidising Fire sales. That is VERY roughly, but you get the idea. It is higly unlikely that people will buy that amount of goods. If they can afford it they have already bought the iPad.
Great analysis!
“If $200 is the new benchmark for tablets and the [Amazon Kindle] Fire takes off…”
Oh, like the $99 HP TardPad ‘took off’.
Sorry Ben Reitzes, but this is “B U S I N E S S” where profits impress and giveaways lead to bankruptcy. I think you need to take a class in accounting.
Could this Amazon Fire-storm be any more hilarious? Oh, the red faces we shall see…
Derek is right on this. ( Currie, t’es Francophone c’p’tete pourquoi eh? ) I’ve seen it with other businesses…. trying to low-ball each other to the point that neither can recover and both fail.
I admit I am communist when it comes to many things. I don’t see why some stupid “star” sports player can make more money then someone who saves lives for a living ( no football player is worth more then ambulance driver or medical staff who saved my live when I went into anapholatic shock, and same goes for anyone who saved someone we know). Yet, my mentality is 1980’s where you have the rich, the middle-class and the poor.. if you couldn’t afford a colour tv with cable (my family couldn’t), then you had black & white tv with farmer vision ( special edition if you wrapped tin foil on the antenna and let one of the kids stand a foot from the tv with one arm extended and one foot up) hahabut its true. with companies trying to “giveaway” so every person can have everything, quality goes to shyt , economy is affected ( because jobs are lost ) and in the end everyone is hurt. Apple has been doing great financially so whatever they’re doing, works.