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Apple: Tim Cook Is Dreaming of an iPad Christmas


The Apple CEO would like to see the iPad return to growth this quarter. It's unclear whether he can make that happen.

As I pointed out in yesterday's Apple (NASDAQ:AAPL) earnings review, the iconic iPad disappointed for the second quarter in a row, selling 14.1 million units vs. expectations of 14.5 million.

This served as a caution flag for investors. The iPad franchise's birth in 2010 kicked off the post-PC era, and it must succeed in order for Apple to be a part of it.

On Monday's conference call, Apple CEO Tim Cook didn't flinch one bit. He said we are heading for an iPad Christmas, and that the unit would return to growth in the quarter.

Is Tim Cook Crazy?

Let's break down the challenge from a mathematical standpoint.

This charts plots quarterly iPad sales along with the year-over-year growth rate. Note that it follows Apple's fiscal year, which ends in September.

I called out the Q1/2013 number (the December quarter last year) of 22.86 million because that represents the year-over-year comparison. It's certainly not an easy one as that was the best quarter ever for iPad sales, aided by the introduction of the iPad mini, which lowered the cost of entry for many shoppers.

So what would it take to drive year-over-year growth for the iPad?

Off last quarter's number of 14.079 million, Apple would need to generate sequential growth of 62.4%.

To generate year-over-year growth of 10%, Apple needs sequential growth of 78.6%.

And to grow iPad units by 20%, it would need a bump of 94.8%.

So Is It Doable?

Yes, for three reasons.

First, looking back at last year's enormous quarter, Apple did manage to generate a 62.9% sequential increase in iPad units. So there is a seasonality element here.

And secondly, the new iPads announced at the October 22 event have been a long time coming.

I created a table showing the number of days between iPad releases:

As you can see, there were three iPad generation releases between 3/11/2011 and 11/2/2012 -- a span of 602 calendar days.
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