Apple's Amazing iPad Business In Context

iPad context slide

Apple’s iPad is already a massive business. The most amazing thing is that it didn’t exist a year ago.

In the first 9 months of sales last year, Apple sold almost 15 million iPads, generating almost $10 billion in revenue.

This year, analysts expect iPad sales figures to nearly double, led by the iPad 2, which goes on sale this Friday.

If iPad sales beat wild expectations this year — the same way they did last year — iPad revenue could potentially reach $20 billion this year.

That’s crazy. And potentially bigger than the Mac business was in 2010, at $18.5 billion.

Last quarter, the 9-month-old iPad business was almost as big as Apple's 26-year-old Mac business. iPads generated $4.6 billion in sales, while Macs generated $5.4 billion. iPads smoked the Mac in unit shipments, though: 7.3 million iPads vs. 4.1 million Macs.

In first-6-months unit sales, Apple beats the gadget hall of fame, including the Motorola RAZR, Sony PSP, and Nintendo Wii

The iPad has even crushed Apple's iPhone and iPad in cumulative shipments over the first 3 quarters. Of course, the iPad probably wouldn't have been possible or nearly as successful without the iPhone and iPod.

Last year's iPad revenue was roughly 5 times bigger than the Frappuccino, which is a $2 billion business, according to Starbucks CEO Howard Schultz in a recent USA Today interview

Apple's $9.6 billion in 2010 iPad revenue is more than the gross domestic product of Macedonia, according to the CIA. That's also more than the GDP of Mali, Armenia, Madagascar, The Bahamas, Haiti, Nicaragua, etc.

Apple's $4.6 billion in iPad revenue last quarter was bigger than Microsoft's Entertainment and Devices business, which generated $3.7 billion from the Xbox, Kinect, and other devices. Both were bigger than Dell's consumer business, which generated $3.3 billion in its most recent quarter.

The iPad is almost as big as Apple's retail empire of 300+ stores: During the 3 quarters of 2010 that the iPad was on sale, Apple Stores generated $10 billion in revenue, versus the iPad's $9.6 billion. Of course, a lot of that Retail revenue *is* iPad revenue, but it should give you some context.

Last quarter, Apple generated more revenue per iPhone sold ($644.78) than iPad sold ($628.56). That's the beauty of carrier subsidies, which push iPhone retail prices down to the $200 range in exchange for 2-year service contracts.

RBC expects annual iPad shipments to approach 28 million this year and pass 60 million by 2014. That could push the iPad close to a $20 billion business this year.

The iPad has two future growth drivers: Consumers AND enterprise

For example: The FAA has approved the iPad for in-cockpit use on aeroplanes for pre- and in-flight course charting, replacing paper maps. Delta and Alaska Airlines are both already interested.

Those are the same iPads that many passengers will be using in the cabin as movie screens, game devices, and e-readers.

Corporate users are already testing the iPad in impressive numbers

During Apple's December quarter earnings call on Jan. 18, the company said that 80% of the Fortune 100 has already deployed or is testing the iPad.

That was up from 65% in Oct. 2010.

As Apple CEO Steve Jobs pointed out during the iPad 2 event, 65,000 apps are now optimised for the iPad, versus about 100 apps optimised for Google's Android Honeycomb tablet OS. But to be fair, the Honeycomb number will surely grow as more devices reach the market.

And people are spending money on those apps: On average, top-25 iPad apps ($5.03) cost more than 3X the amount of iPhone apps ($1.55)

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