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Apple to Unveil New IPad as Rivals Step Up Tablet Challenge

A customer demonstrates Apple's App Store on an iPad tablet computer at a Best Buy store in Orem, Utah. Photographer: George Frey/Bloomberg
A customer demonstrates Apple's App Store on an iPad tablet computer at a Best Buy store in Orem, Utah. Photographer: George Frey/Bloomberg

March 2 (Bloomberg) -- Apple Inc. is set to refresh the iPad computer line to stave off challenges from rivals that are rushing into the fray with tablet-style devices of their own.

The new iPad, expected to be introduced today at an event in San Francisco, is likely to have a more powerful processor, a thinner body and front- and rear-facing cameras, said Carl Howe, a director at Yankee Group, a research and consulting firm.

Apple had little competition when it entered the market, and it has built demand for devices that blend the features of a smartphone and laptop computer. In less than a year, the iPad has become one of Apple’s top sellers, surpassing the almost decade-old iPod media player. The new model will face upstart tablets from Motorola Mobility Holdings Inc., Samsung Electronics Co. and Research In Motion Ltd.

“Everybody else is coming up with release one and they are coming out with release two,” said Howe, noting that the iPad was one of the fastest businesses to ever reach $1 billion in revenue. “The challenge is how you follow that up.”

Howe, formerly an analyst at Forrester Research, performs market research on the technology industry. He said Apple could aim to foil its competitors by cutting the price of the iPad, though he called that move unlikely.

The iPad now ranges in cost from $499 for a base model with 16 gigabytes of memory, to $829 for a 64-gigabyte model with 3G Internet access. Motorola’s Xoom tablet computer starts at $599 with a two-year wireless contract, and Samsung’s Galaxy Tab starts at $249.99 with a two-year contract.

Customers weren’t able to access Apple’s online store early today because the company was updating the website. A message on the site said, “We’ll be back soon.”

Rival Devices

Motorola said on Monday that sales of the Xoom, available through Verizon Wireless, had started “relatively well” and it plans to introduce tablets with other carriers this year. The Xoom has drawn accolades from reviewers including Bloomberg’s Rich Jaroslovsky, who said it’s a “worthwhile competitor” to the iPad.

Samsung said on Jan. 27 that it had shipped 2 million Galaxy Tab devices. Both are based on Google Inc.’s Android operating system. Research In Motion plans to introduce its PlayBook tablet this year.

The first version of the iPad sold 14.8 million units through December, generating $9.6 billion in sales. This fiscal year, the iPad may bring in as much as $16.3 billion in revenue for Cupertino, California-based Apple, according to Sanford C. Bernstein & Co. in New York. The iPhone, now Apple’s top-selling product, didn’t cross that threshold until last year, more than three years after its introduction.

Global Market

The global tablet market is projected to surpass 200 million units in 2014, up from 17 million in 2010, according to consulting firm PRTM. Apple Chief Operating Officer Tim Cook, who has taken over day-to-day operations of Apple while Chief Executive Officer Steve Jobs is on medical leave, told Sanford C. Bernstein analysts that the tablet market will eventually surpass the global market for personal computers, which totaled 350 million sold last year.

If Cook’s forecast proves correct, the iPad may eventually generate $60 billion to $100 billion in sales for Apple, according to Bernstein’s Toni Sacconaghi, who published a report on Monday after meeting with Apple executives last week. That compares with Apple’s total revenue of $65.2 billion in fiscal 2010. The report didn’t say when iPad sales might reach that level.

Holding the Market

Apple controls about 90 percent of the tablet market, according to Ashok Kumar, an analyst at Rodman & Renshaw Inc. Even with the new entrants, he expects Apple to hold at least two-thirds of the market.

“The iPad is the tablet market and the tablet market is the iPad,” Kumar said.

Today’s event is Apple’s second major product announcement since Jobs went on leave Jan. 17. Cook represented the company shortly thereafter when it announced the iPhone would be available through Verizon Wireless, ending AT&T Inc.’s exclusive hold in the U.S.

It wasn’t clear whether Jobs, who first introduced the iPad in San Francisco last January, will attend today’s event. Steve Dowling, a spokesman, declined to comment.

Apple rose $2.69 to $352 at 11:08 a.m. New York time in Nasdaq Stock Market trading. The shares had gained 8.3 percent this year before today.

Sales of Apple’s new iPad may exceed those of the first generation, which sold more than 300,000 in its first day and 1 million in its first 28 days, Brian Marshall, an analyst at Gleacher & Co., said in an interview yesterday on Bloomberg West.

The device has been adopted by companies including JPMorgan Chase & Co., Wells Fargo & Co. and Archer-Daniels-Midland Co. At Apple’s annual shareholder meeting last week, Cook said the company is adding to its sales force to sell more iPhones and iPads to businesses.

To contact the reporters 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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