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Apple: Tim Cook Is Dreaming of an iPad Christmas

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

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By shifting the new iPad schedule from March/April to November in 2012, Apple squeezed an extra generation in, helping drive a huge fiscal 2012 for the iPad, with growth of 80%.

That may very well have pulled some sales forward due to the usual excitement surrounding new Apple products, especially with last year's $329 iPad mini.

So after that rapid pace of new product introduction -- a new iPad generation every 200 days -- we're forced to wait 364 days for the latest fifth generation. That adds an element of pent-up demand to the equation.

And third, the new iPads are receiving rave reviews.

As a sample, here's what Engadget said:

Surprise: The iPad Air is the best iPad we've reviewed. In addition, though, it's also the most comfortable 10-inch tablet we've ever tested. Not every manufacturer can produce a thin and light device without also making it feel cheap or flimsy, but Apple nailed it. Factor in a sizable boost in performance and battery life, and the Air is even more compelling. The last two iPads served up relatively few improvements, but the Air provides people with more of a reason to upgrade or even buy a tablet for the first time.

And just for fun, here's a screenshot of Google (NASDAQ:GOOG) results from a search for "iPad Air review":



The Pickle

While there's clearly reason to be optimistic about an iPad rebound this quarter, there is one nagging issue: pricing.

Apple slapped a $399 price tag on the iPad mini with Retina display -- a $70 increase from last year's iPad mini.

The old iPad mini model is still in the mix at $299, but that's a mere 9% discount from the original price of $329 one year ago.

Apple's objective is clear: It wants to protect its profit margins and its status as a premium brand.

There's a host of cheap iPad alternatives, like Google Android tablets and Chromebooks, taking share in the low end of the mobile device market. Apple could completely upend them by tossing a $199 iPad into the mix, but it would give away its soul.

It's quite telling that the company hired Angela Ahrendts, former CEO of Burberry (OTCMKTS:BURBY) to head up retail operations.

Salesforce.com (NASDAQ:CRM) CEO Marc Benioff even called her Apple's future CEO:



It would certainly make sense, given Apple's insistence on ignoring the low end of the computing market. Remember, when every company has access to the same software, the same hardware components, and the same contract manufacturers, differentiation is hard to come by -- especially when it comes to branding. Apple's got it, and Ms. Ahrendts would likely protect it as well as anyone.

Nevertheless, Apple is walking a fine line here in terms of pricing.

And if it can pull off a big iPad quarter this time around, the sky's the limit.
Position in AAPL
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