We’re still a few days away from the presumed unveilling of Apple’s mythical tablet computer and already analysts are trying to divine the impact the new device will have on the company’s bottom line. RBC Capital Markets analyst Mike Abramsky expects Apple (AAPL) to sell 5 million tablets in the product’s first year at market. At a retail price of $600, and a 30 percent gross margin, that would generate about $2.8 billion in revenue and add 30 cents to EPS. This assumes the tablet is neither a hit (iPhone) nor a niche (MacBook Air) product, but ends up somewhere in between, the scenario that Abramsky believes is the most likely.
As the analyst notes, nailing the sweetspot on price is crucial to the device’s success. “… Pricing is key,” Abramsky writes. “… Significant demand exists at $500-799, narrowing at $1000 at which level subsidies may be needed (assuming a mobile data version) for mass acceptance, suggesting both retail and carrier marketing/distribution similar to iPhone. … An Apple tablet priced at $500-700 unsubsidized ($200-300 subsidized) strikes squarely at heart of the entry level laptop and Netbook markets. Although the tablet would not offer the breadth of features or raw performance of traditional laptops, it would deliver an optimal experience for buyers looking for user-friendly, media-centric computing at entry-level price points. The tablet may cannibalize some Mac and iPod Touch buyers (est. 2-5% in scenario analysis), but the lack of Mac OS X compatibility (and emulated Windows) reduces the appeal of the tablet as a Mac replacement for Apple’s traditional premium Mac buyers.”
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