Bloomberg News

Apple Starts Selling Third IPad to Widen Lead Over Google

March 16, 2012

Shoppers enter the Apple Inc.'s store in Covent Garden to buy the new iPad tablet computer, in London. Photographer: Chris Ratcliffe/Bloomberg

Shoppers enter the Apple Inc.'s store in Covent Garden to buy the new iPad tablet computer, in London. Photographer: Chris Ratcliffe/Bloomberg

Apple Inc. (AAPL) started selling its new iPad today, betting on a sharper screen and faster chip to extend its lead over Google Inc. and Amazon.com Inc. (AMZN) in the growing market for tablet computers.

At Apple’s glass-walled store in Sydney’s George Street, employees in blue T-shirts cheered and counted down the seconds until doors opened at 8 a.m., as a line of at least 200 people snaked around the city block. Two hours later, the iPad went on sale at Softbank Corp. (9984)’s Ginza store in Tokyo.

“There seems to be a lot of improvement in the new iPad,” said Takaya Ito, 37, an associate professor at Tokyo’s Aoyama Gakuin University who was upgrading from his iPad 2. “I read a lot of theses on the iPad, but since the display isn’t so good in the iPad 2, my eyes get tired. I’m hoping the new model will solve that.”

The 9.7-inch device, unveiled by Chief Executive Officer Tim Cook on March 7, is the biggest upgrade yet to Apple’s tablet before Microsoft Corp. (MSFT) introduces new software for competing devices. Generating demand with the model is important for Apple to fend off competition from devices using Google’s Android operating system and the $199 Kindle Fire from Amazon that’s popular among cost-conscious buyers.

“It leaves everyone else behind again,” said Jean-Louis Lafayeedney, an analyst at JI Asia in Hong Kong.

‘Beautifully Integrated’

The new iPad, with a price tag of $499 to $829 in the U.S., includes a chip that enables better graphics, Apple said. It also boasts a screen with more pixels than traditional high- definition TVs and runs on long-term evolution, or LTE, wireless networks that deliver data faster.

Apple will sell a $499 base model that has 16 gigabytes of memory and works only on Wi-Fi networks. An $829 model has 64 gigabytes of memory and works on both Wi-Fi and LTE networks.

After debuting today in Australia, Japan, Hong Kong and Singapore, the device is scheduled to go on sale in France, Germany, the U.K., Canada and the U.S.

“I’ve got all their stuff,” said Jonathan Hakim, 22, a doctoral student and wedding photographer in Sydney who started lining up for the iPad yesterday afternoon. “Everything works together. It’s so beautifully integrated, it’s so streamlined.”

Early Opening

Kento Inoue, a 20-year-old university student who was first in line outside the Apple Store in Tokyo, said he showed up at 7 p.m. on March 14.

“I wanted to be the first person in Japan to get the new iPad,” said Inoue, who already owns the previous two models. “I’m proud of it.”

About 70 people lined up at Softbank’s store, compared with about 250 who waited for the iPad 2 last year, said Arata Kurihara, a spokesman for Japan’s third-largest mobile-phone carrier. The decrease is probably because customers have realized they can reserve the model without waiting in line, he said. Some versions of the new iPad were almost out of stock, Kurihara said.

In Hong Kong, buyers had to register online yesterday to be able to get a new iPad today. The city’s sole Apple Store opened an hour earlier at 8 a.m. to allow those who’d registered to collect their tablets.

About 50 customers with advance reservations waited outside when the shop opened. Ronald Ng, a 22-year-old university student, wasn’t able to reserve a device yet his girlfriend succeeded.

“I was so upset,” Ng said. “I want to buy two.”

Telstra, Optus

His girlfriend, 22-year-old Jennifer Chung, said the 64- gigabyte iPad she bought for HK$5,888 ($759) will be even more portable than the MacBook Air she already owns.

“I’m going to use it to surf the Internet and watch movies,” Chung said. “I’ll also take it to school.”

In Australia, Telstra Corp. (TLS), the nation’s biggest phone company, and the second-ranked Optus unit of Singapore Telecommunications Ltd. (ST) began sales of the new iPad. Even though the product doesn’t work on Telstra’s new fourth-generation network, it will be compatible with existing third-generation services.

Stephen Parkes, 37, lined up four days ago and was the first customer into the Sydney store. He said he was paid A$950 ($1,000) by freelance employment website Airtasker.com to wait.

“I’ve just had some changes of clothes, some shorts, a warm jacket,” the former truck driver said. “The Apple guys have been pretty good, letting me use their bathroom.”

Speeds Don’t Matter

Outside Apple’s London store on Regent Street, employees started cheering at 1 minute to 8 a.m. to a crowd of several hundred people that had been waiting for more than 12 hours. Hassan Ali, 20, was near the back of the line even he had joined the queue around midnight. “The camera and the games will be better than the laptop,” he said.

Europeans buyers of the new iPad won’t be going after speeds because faster LTE networks are available only in a few countries such as Sweden and parts of Germany and are still being planned in others including France and the U.K.

Anton Makhlov and Roman Okhotnitskiy, two Russian students who flew to Germany for an iPad, were first in line outside the shop in Frankfurt’s business district. Spending the night in a sleeping bag was worth it because of the retina display and the new camera, they said.

Having Fun

“It’s like a special challenge for us just to come to Germany to have some fun, to meet people, to communicate, to get the iPad,” said Okhotnitskiy, who studies political science in Moscow. “We are not geeks.”

In downtown Zurich, outside the Swiss flagship store on Bahnhofstrasse, onlookers snapped photos of the crowd with iPhones and customers in the line listened with headphones to music on their iPods. One Japanese tourist stopped a security guard to ask if there had been an accident.

“I am not the total fashion victim and I don’t always buy the latest model,” said Mike Krause, 26, who works at a bank. “However, for a while I wanted to have an iPad.”

Shares of Cupertino, California-based Apple rose past $600 in New York yesterday for the first time, before closing down 0.7 percent at $585.56. The stock has climbed 45 percent this year. Apple gets about 20 percent of its sales from the iPad while the company’s biggest product by revenue is the iPhone.

Shares Surge

The stock’s climb is spurring unprecedented volume in options markets, where speculation that the new iPad is another hit pushed the price of bullish contracts to the highest ever.

Calls to buy the world’s most valuable company cost 1.11 times more than puts to sell, and the premium reached an all- time high of 1.13 on March 14, according to 30-day implied volatility data compiled by Bloomberg.

Market research firm Gartner Inc. said 103.5 million tablets will be sold in 2012, with Apple accounting for two- thirds of those.

Total sales will increase to 326.3 million in 2015, with Apple’s share dropping to 46 percent as Google and Microsoft gain customers, according to Gartner.

Tablets by Research In Motion Ltd. (RIM), Samsung Electronics Co. (005930) and Hewlett-Packard Co. (HPQ) haven’t gained much interest.

Amazon shipped 4.7 million Kindle Fires in the fourth quarter, giving it almost 17 percent of the market and putting it at No. 2, according to Framingham, Massachusetts-based research company IDC. Amazon’s website gives it a sales channel on par with Apple’s retail stores, said Sarah Rotman Epps, an analyst at Forrester Research Inc. (FORR)

Carolyn Wu, an Apple spokeswoman in Beijing, said no date was set for sales of the new iPad at the company’s five stores in the capital city and Shanghai. She declined to comment on whether a lawsuit concerning rights to the iPad trademark in China would affect sales there.

Apple has said it bought the rights to the iPad trademark in China in 2009 from the Taiwan unit of Proview International Holdings Ltd. (334) A Shenzhen court ruled last year that the contract wasn’t valid because the local unit that owned the China trademark hadn’t been represented in the sales talks.

Apple appealed that decision Feb. 29, and a ruling is set to be made within three months.

To contact the reporters on this story: Shunichi Ozasa in Tokyo at sozasa@bloomberg.net; David Fickling in Sydney at dfickling@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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