Apple Poised to Sell 600,000 IPad 2s in Its Debut, Outpacing First Model

Apple Inc. (AAPL) may sell 600,000 of the second version of the iPad in its debut this weekend, extending the device’s lead in a crowding market.

The iPad 2 went on sale on Apple’s website at 4 a.m. New York time, before appearing in U.S. stores at 5 p.m. Brian Marshall, an analyst at Gleacher & Co. who predicted more than a half-million in unit sales, is one of several who expect the iPad 2 to outpace its predecessor. Apple sold 300,000 of that version in 24 hours.

The iPad line is the fastest-selling technology product in history, measured by revenue, said Tim Bajarin, an analyst at Creative Strategies Inc. In less than three months, it topped $2 billion -- a milestone the iPhone took more than six quarters to reach. The second version has a head start on rivals, which are only now releasing their first models. It’s also benefiting from distribution through additional retail outlets.

“Apple has such a huge lead,” said Bajarin, who has covered the industry for more than 20 years and works as a technology consultant. He projects 500,000 units in two days. “Competitors are going to be chasing Apple for many years.”

White Version

Bajarin -- along with analysts from Rodman & Renshaw LLC and Piper Jaffray & Co. -- also predicts the device will outsell the first iPad, which came out in April and sold more than a million units in 28 days. Apple will get a boost from offering a white model for the first time, he said.

Apple gained $5.32 to $351.99 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have risen 9.1 percent this year.

The iPad 2 is available at 236 Apple stores. It’s also being sold at more than 10,000 outlets of AT&T Inc., Verizon Wireless, Wal-Mart Stores Inc., Best Buy Co. and Target Corp., according to Piper Jaffray’s Gene Munster. It goes on sale in 26 other markets on March 25.

Last year, Apple had 221 stores and it sold the iPad through about 1,100 other outlets, according to Munster. Through December, it sold a total of 14.8 million iPads, generating $9.6 billion in sales.

Customers began lining up at Apple stores hours early.

“I sold my old iPad and some other stuff, other gadgets, to pay for the new one,” said You-You Xue, 13, who had waited overnight to be first in line at the store in Burlingame, California, about 16 miles south of San Francisco. His father checked in on him throughout the night -- calling his mobile phone and driving by the store, Xue said. “The tax will have to be paid for by my dad.”

Faster Growth

According to the Consumer Electronics Association, tablets make up the fastest-growing consumer-electronics segment. In 2010, with the iPad’s introduction, total tablet sales surged to more than 10.3 million units, from 90,000 in 2009. That rate of adoption tops those of game consoles and smartphones, according to the Arlington, Virginia-based trade organization.

Apple also has a price advantage over its competitors, said Ashok Kumar, an analyst for Rodman & Renshaw in San Francisco. The cost is the same as the original version, starting at $499 for a base model with 16 gigabytes of memory. Motorola Mobility Holdings Inc.’s Xoom tablet costs $799 for 32 gigabytes -- $70 more than a comparable iPad.

“The iPad 2 is essentially the tablet market,” Kumar said, predicting the company will sell 35 million units this year. “That very well could be conservative.”

VCRs, DVDs, Cameras

The device’s faster processor speeds up performance and improves graphics quality, and front and rear cameras allow for videoconferencing. It’s also 15 percent lighter and 33 percent thinner than the previous model. Customers have access to more than 350,000 applications in Apple’s App Store, including more than 65,000 tailored for the iPad.

Since Chief Executive Officer Steve Jobs unveiled the iPad last year, it’s become one of Apple’s top products. The tablet generated more revenue last quarter than the iPod, the best- selling media player.

The iPad built a following faster than the original video- cassette recorder, DVD player, game console or digital camera, said Colin McGranahan, a retail analyst at Sanford C. Bernstein & Co. in New York.

In addition to appealing to consumers, the iPad has been popular with businesses, including JPMorgan Chase & Co., Wells Fargo & Co. and Archer-Daniels-Midland Co.

This fiscal year, the iPad may bring in revenue of $16.3 billion for Apple, according to Toni Sacconaghi, another analyst at Bernstein. The iPhone didn’t reach that level until more than three years after its release.

Competing devices from Motorola and Samsung Electronics Co. are struggling to match Apple’s success and price. As new tablets come to the market this year, there could be a “bubble” of rival devices, Mark Moskowitz, an analyst at JPMorgan, said in a research note. That would create more supply than demand.

“The technical and form factor improvements of the iPad 2 stand to make it tougher for the first generation of competitive offerings to play catch-up,” Moskowitz said in a research note.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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