Just last week we noted a new study from the Gartner Group Inc. (NYSE: IT) that the iPad from Apple Inc. (NASDAQ: AAPL) looked set to dominate the tablet market until at least 2015. Apple is expected to garner 73% of the 64 million tablets sold in 2011. Apple’s share of the pie is not likely to get smaller, but the pie may be shrinking.
Bloomberg is out with a story that a new report from JPMorgan Chase & Co. (NYSE: JPM) claims that Apple has cut orders for the iPad 2 to its suppliers by 25% for the fourth quarter. The report from JPMorgan notes that Apple took 17 million iPads from suppliers in the third quarter and that number could fall to 13 million in the fourth quarter. JPMorgan’s analyst did not lower sales projections for the third and fourth quarters, indicating that the Apple might be expecting a slowdown in iPad shipments beginning in January.
That’s not good news for Apple’s suppliers, including Hon Hai Precisions Industry Co. Ltd. (OTC: HNHPF), known as Fox Conn, and it may not be good news for vendors with competing products, including Research in Motion Ltd. (NASDAQ: RIMM), Hewlett-Packard Co. (NYSE: HPQ), Dell Inc. (NASDAQ: DELL), and Samsung Electronics (OTC: SSNLF). Amazon.com (NASDAQ: AMZN) is expected to introduce a full-featured tablet device to compete with the iPad in time for this year’s holiday season.
The Gartner research claimed that 103 million tablets would be sold in 2012, of which Apple’s share would be 67% and rival systems, mostly based on Google Inc.’s (NASDAQ: GOOG) Android platform, would get 22%. Is that figure in jeopardy?
The most likely explanation for the cut in iPad 2 orders is the imminent release of the next version of the device, the iPad 3. The company is likely to have locked in parts it thought it would need to build the iPad 2 and is now cancelling those orders in anticipation of the iPad 3’s release.
And as for the iPad 3 release, the cut in orders might indicate that Apple is nearer to releasing the iPad 3 than it originally planned or than anyone expected. If that’s true, then the cut to the iPad 2’s parts orders likely only means that a new order for iPad 3s is on the way.
Apple did make a similar order adjustment between the original iPad and the iPad 2. Still, the size of the latest order cut is unprecedented according to JPMorgan’s analyst. Which could indicate that Apple expects the iPad 3 to be an even bigger success than it originally planned for.
A betting person would have to go with the latter. If the Gartner projections of 103 million units sold in 2012 is fairly accurate, then Apple’s unit sales should increase by about 26 million units next year. And the company is betting that the iPad 3 will be the hottest seller ever. In the last few years, nobody got rich betting against Apple.
Another report from Canaccord Genuity this morning is saying that Apple is opening new stores in Asia and showed that its channel checks show strength. The research report from the firm reiterated a “Buy” rating and $545 price target.