iPad to hit stores Saturday as consumer test begins

SAN FRANCISCO Mon Mar 29, 2010 11:53am EDT

Media members try out the new ''iPad'' during the launch of Apple's new tablet computing device in San Francisco, California, January 27, 2010. REUTERS/Kimberly White

Media members try out the new ''iPad'' during the launch of Apple's new tablet computing device in San Francisco, California, January 27, 2010.

Credit: Reuters/Kimberly White

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SAN FRANCISCO (Reuters) - After months of hype, speculation and secrecy, Apple Inc will finally put the iPad tablet to the test that truly matters: the buying public.

IPad sales are widely expected to rocket out of the gate this Saturday, helped by the scores of core Apple fans who are expected to line up hours before U.S. stores open at 9 a.m. on the East Coast, to be among the first to play with the new gadget, which costs a minimum of $499.

Although those who preordered the iPad will be able to pick it up on April 3, those placing online orders more recently have been told that their device may not ship until April 12.

But putting the launch hype aside, what is less certain is whether the iPad can attract a mainstream following beyond the first few months of excitement and into next year, defining a new category of devices that bridges the gap between a smartphone and notebook computer.

Apple's shares have soared to record highs as analysts add the iPad to their earnings estimates and amid reports of brisk preorders. But forecasts for first-year sales vary widely -- from 2 million to 5 million units -- reflecting the difficulty in predicting the size of a yet-to-be-proven market.

Never lacking for ambition, Apple is offering the iPad as a new type of media device that fuses the mobility and simplicity of a smartphone with the speed and screen-size of a laptop.

"It's high-risk, high-reward because given the narrowness of Apple's portfolio, if you bring out a product that falls on its face, it does damage to you," said Gartner analyst Van Baker, who expects the iPad to be a hit.

The iPad resembles a large iPhone, with a 9.7-inch touch screen, and can run most of the 100,000-plus applications, games and entertainment that have made the iPhone so popular.

It is a typically sleek Apple creation at a half-inch thick and 1.5 pounds, with WiFi and 10 hours of battery life. Wireless-compatible 3G versions will come later in April, with the most expensive model topping out at $829.

Technology enthusiasts have praised the iPad's beautiful screen and fast Web browser, but also noted flaws: it does not have a camera for video chat, it cannot run more than one app at a time, and it cannot view popular video sites such asHulu.com, which use Adobe's Flash software.

These early reviews were based on brief tests after Apple Chief Executive Steve Jobs unveiled the iPad in January. Influential columnists such as Walt Mossberg of the Wall Street Journal and David Pogue of The New York Times have yet to weigh in -- and they could help sway iPad sales for those outside the tech cognoscenti.

MEDIA DEALS

Another factor that will affect sales is how many media companies Apple is able to eventually bring on board. Companies such as Sports Illustrated publisher Time Warner Inc and Wall Street Journal publisher News Corp are planning digital editions for the iPad, although Apple's talks with some others have reportedly been bogged down by pricing.

Apple is also launching its own digital book business to compete with the Kindle from Amazon.com Inc and other e-readers and e-books.

If the iPad is successful, it could set the standard for a wave of tablets later this year from rival vendors including Hewlett-Packard Co and Dell Inc, and provide a bridge for print media to a digital future.

Given Apple's track record in making category-defining products, the bar is set high for early iPad sales. IPhone sales passed the 1 million mark 74 days after it launched in 2007, and it sold more than 2 million in the holiday quarter that year after a big price cut in September 2007.

Apple has sold more than 40 million iPhones in the less than three years it has been on the market.

Barclays Capital analyst Ben Reitzes estimates 1.2 million iPad sales in the June quarter, and Broadpoint Amtech analyst Brian Marshall is predicting 850,000 units. Both noted that their estimates could prove to be conservative.

"I think we need Joe Six-Pack in the retail stores touching the iPad to understand the true importance of it. Then a light bulb will go off and he'll say 'a-ha!,'" Marshall said.

He expects the iPad to quickly become a new growth line for Apple, adding $2.4 billion in sales this calendar year and 65 cents to earnings per share. For the fiscal year ending in September, Wall Street expects $54.1 billion revenue and EPS of $11.68.

Marshall estimated the iPad's gross margin at 50 percent, less profitable than the iPhone's 60-percent plus, but far more lucrative than iPods and Macs at roughly 30 percent.

Since hitting a three-month low in January, Apple shares have risen more than 20 percent to about $233. More than a dozen analysts have lifted their price targets since the iPad unveiling, and the median target now sits at about $260.

Research group ComScore recently released a survey showing 15 percent of respondents were "seriously" considering buying an iPad in the next three months.

"Steve Jobs has a very good feeling for what makes sense for the consumer," said Tim Bajarin, president of consulting company Creative Strategies. "He's not going after the tech crowd with the iPad, he's going after the mainstream consumer.

"The first six to nine months, it will come out of the block fast, but the measure of success will be how it's doing after its first full year," he added.

(Reporting by Gabriel Madway, editing by Tiffany Wu and Maureen Bavdek)

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