The demand for the Apple (AAPL) iPad may be like the iPhone and iPod. iPod sales are now approaching 300 million worldwide, although it is not clear how many of those units are replacements of older versions. It hardly matters. A sale is a sale. iPhone sales are close to 50 million, if those that are “unlocked” to run on multiple cellular services are included.
New research from IDC says that “27 percent of 18-34 year olds” are interested or extremely interested in purchasing the product. Among current owners of Apple products thirty-seven percent said that “liking the Apple brand” was the main reason for their interest. Those numbers could translate into extraordinary sales of the iPad
Apple’s major hurdle to selling the iPad is probably price. The main consumers have rejected the Amazon (AMZM) Kindle has been its high price, according to several surveys. IDC found among potential iPad buyers “the prospect of spending $500 or more for a new device that doesn’t yet have a clear advantage over their other primary devices is unappetizing.”
Apple may have to quickly cut prices the way that it did with the iPhone to keep consumer interest in the iPad high. That will hurt Apple’s margins unless it can pass the costs of the price cuts on to its suppliers.
If Apple does have to lower the price of the iPad quickly, it may lose some of its reputation as a premium product. That could lead to consumers viewing it as no better than table PC offerings from HP (HPQ) and Dell (DELL). One of the ironies about Apple products is that high prices seem to make them more attractive than their competition. This may be why the Mac has a larger share of the market for computers with prices above $1,000 that it does for the balance of the industry.
Features will be the critical reason to the success of the iPad, but price may be just important. The question is whether it is critical for the new tablet PC to be cheap or expensive.
Douglas A. McIntyre