Apple – iPad Mini Is Screaming

Malcolm is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple (NASDAQ: AAPL)  started selling its new iPad Mini on November 2. In the opening weekend over 3 million iPads were sold, including the Mini and a new 4G iPad.

Today, Aaron Lee of Digitimes reports that sales of the Mini are greatly exceeding expectations, and that Apple has increased its order.

Apple originally estimated shipments of 10 million iPad minis for 2012, but due to component shortages caused by weak yields, Apple later adjusted the volume to only 6-8 million units. However, with yield rates improving, iPad mini shipments for the first two months of the fourth quarter have already surpassed eight million units, and should successfully break 10 million for the quarter with a chance to reach 12 million, the sources noted.

In a detailed article of Apple’s projected earnings for the current quarter, I suggested they would sell 10 million units of the Mini. Perhaps I was too conservative.

I also projected a 40% cannibalization rate of the larger model, which I think is high. So overall sales may be higher yet.

Implications

The viability of the new iPad Mini was questioned when released due to the high $329 price tag. Assuming this Digitimes report is correct, these fears are now proved baseless. In fact, the sales are exceeding expectations.

In a detailed article projecting earnings for the current quarter, I suggested Apple would sell 10 million units of the Mini. Perhaps I was too conservative. I also projected a 40% cannibalization rate of the full sized model, which I think is high. With people flocking to see the Mini, I am sure that some extra sales will pass over to the iPad grande as well. So sales here may be higher yet.

Android

This popularity of the new iPad Mini will definitely help in Apple’s battle against Android. As noted in my post on smartphone market share, Goldman Sacks recently said that smartphones with the Google (NASDAQ: GOOG) provided OS will suffer from lack of traction in the tablet space, particularly in the enterprise. People, the GS report notes, want one seamless operating system in which they can share apps and data. Forrester Research has said that enterprise “information workers” have a strong influence on the buying habits of others. Meanwhile, Intermedia reports that Apple tablets own 92.6% of the small to medium-sized business market. [See graphic below.]

Put these three data points together and it looks very good for Apple to expand its market share, in the smartphone arena as well as the tablets.

Conclusion

Overall, this shows that Apple is still doing fantastically well. There is no real reason to believe that the iPhone sales have slipped, the new iMacs are selling out, with 7-10 day delivery times listed on Apple’s store site, and word is they are sold out in Amazon.

We know the iPhone 5 is doing well and the supply chain seems to have worked out many of the kinks. Now this new news indicates that we should expect a great quarter from Apple. Once the Capital Gains deadline has been breached, shares should do very well.


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Related Article: Apple Physics - what goes down must go up.

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Malcolm Manness has a Masters degree in Computer Science, and worked for 14 years in development, technical publications and software quality assurance. He has been investing for 20 years. Currently, he does writing, and FileMaker Pro programming on contract.

His short fiction can be found (under pseudonym J. Seunnasepp) at http://50centflash.com/.

 

==== Understanding Apple series

You may love Apple and their products, or hate them to the core, but you cannot deny that Apple now has the highest market cap of any company, their products are trend setters, and currently they are trading at rather low multiples, especially regarding forward earnings.

Warren Buffet has the maxim: “Invest in what you know!” So, for those who want a unique perspective on Apple’s success, I have a series of articles Understanding Apple. I hope you will find them helpful and provocative.

Let me know what you think.

 


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