Apple's iPad debuts strongly, but key tests remain

(Reuters) - Apple Inc sold more than 300,000 iPads on the tablet computer's first day in stores, a strong showing that roughly matched Wall Street forecasts and mirrored the iPhone's debut in 2007.


Despite a solid opening weekend, which prompted several investment banks to raise their earnings and revenue forecasts, the bigger test will come later this year, as consumers outside the company's core fan base size up the iPad.

Questions remain about whether consumers will shell out $500 or more for a device that fits between a smartphone and a laptop, and which Apple hopes pioneers a new class of device.

It hopes the sleek iPad joins the iPod and the iPhone in its stable of successful consumer products, providing the next driver of growth as sales of its multimedia player and smartphone begin to moderate.

Should it take off, the iPad would not only provide a new market for component makers, but another platform for which software developers and content companies would hawk their wares.

Time will tell whether Apple has another bona fide hit on its hands, but media companies like New York Times Co and News Corp are betting the iPad will erect a profitable bridge from print to digital content.

"The launch went pretty much as expected; it was well received," said Shannon Cross of Cross Research. "There is widespread enthusiasm for the product, but it's a new category, and it will take time for people to understand it."

Apple has staked its formidable reputation on a 9.7-inch touchscreen tablet with no clear-cut case for use other than pure media consumption. Rivals including Hewlett-Packard Co and Dell Inc are preparing tablets of their own later this year, so consumers will have a range of choices, particularly in the crucial holiday period.

"From a bigger strategic picture, the iPad is a content gatherer for Apple; that's what separates it from the others," said Broadpoint Amtech analyst Brian Marshall. "This has been a successful strategy for Apple in the past with iTunes," the company's online music store.

MARKET HOOPLA

Many analysts believe the company likely sold 350,000 to 400,000 iPads for the weekend. A number of Apple stores in the United States were closed for the Easter holiday on Sunday.

At least four brokerages full-year earnings estimates and price targets for Apple following the iPad launch.

Following the launch, JPMorgan raised its price target on Apple stock to $305 from $240; Kaufman Brothers increased it to $295 from $253; and Thomas Weisel Partners lifted its price target to $280 from $270. Susquehanna raised its price target to $275 from $260, while Barclays kept its target unchanged at $285.

Shares of Apple closed up 1.1 percent at $238.49 on the Nasdaq, close to its all-time high of $238.73. The stock ran up last week in anticipation of the debut of the tablet computer on Saturday.

Apple's shares now trade at around 20 times forward earnings. The median analyst price target on the company is $280, according to Thomson Reuters I/B/E/S.

BMO Capital Markets analyst Keith Bachman called the first-day sales figure "reasonable, but not a blowout number."

He said the iPhone sold at a similar pace to the iPad in the early going. iPhone sales passed the 1 million mark after 74 days in 2007.

Apple's first-day iPad sales included deliveries of pre-ordered iPads to customers -- which may have helped depress opening day crowds at some locations -- as well as shipments to sales partners and sales at Apple retail stores.

"I don't think investors should expect this to be an overnight sensation," said Oppenheimer & Co analyst Yair Reiner.

"Apple sold to the first 300,000 buyers, they were the easy ones," he said. "The next 10 million will be a lot tougher. For a lot of those incremental buyers, the use case has yet to be made."

Analysts expect the company to sell 1 million or more iPads in the current quarter ending in June. Wall Street expects the company to sell around 5 million in 2010, although estimates vary widely.

Only the Wi-Fi version of the iPad went on sale Saturday, and only in the U.S. Apple will expand to nine international markets, and roll out a 3G-compatible iPad, later this month, with wireless service from AT&T.

FESTIVE MOOD

Media companies are not the only ones counting on the success of the iPad. Companies found to have supplied some of the key components to the iPad received a boost in trade on Monday [ID:nN03146377].

Those include Samsung Electronics Co Ltd, up 1.5 percent; LG Display Co Ltd, up 2.2 percent; Broadcom Corp, up 4.5 percent; and Texas Instruments Inc, up 3.1 percent.

An analysis by teardown firm Chipworks also identified chips in the iPad from suppliers such as Cirrus Logic Inc, which jumped 8 percent Monday, Atmel, Linear Technology, Intersil, and STMicroelectronics.

Others may be quaking. Susquehanna Financial analyst Jeffrey Fidacaro said the iPad was likely to take share from Amazon.com Inc's Kindle because of its robust e-reader capabilities. Amazon shares were off 0.2 percent.

There did not appear to be any supply issues on the iPad's opening weekend, as some had feared, with only a few reports of stores selling out, as was the case during the iPhone's launch.
Long lines and boisterous crowds emerged at Apple stores in big cities such as New York and San Francisco, but some stores in suburban areas were not as crowded.

Apple said iPad users downloaded more than 1 million applications from the company's App Store and more than 250,000 ebooks from its iBookstore during the first day.

(Additional reporting by Franklin Paul in New York and Supantha Mukherjee in Bangalore; Editing by Edwin Chan and Gerald E. McCormick)

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Special Report: iPad striptease: It's what's inside that counts

(Reuters) - The iPad will not hit stores until Saturday, but the race to unlock its mysteries started several weeks ago in San Luis Obispo, a picturesque college town roughly 200 miles south of Apple's Silicon Valley headquarters.

On March 12, Kyle Wiens and Luke Soules woke up before dawn. Their plan demanded that they be among the first to get their hands on the device.

So at 5:30 a.m., the minute Apple began taking iPad orders on its website, Wiens and Soules -- do-it-yourself repair evangelists and co-founders of a company called iFixit -- placed theirs. As delivery addresses, they entered several U.S. locations where their research determined the iPad is likely to arrive soonest. They could tell you which ones, but they would have to kill you.

Armed with heat guns, suction cups and other tools of the trade, the duo will set out on Saturday to reveal some of the tablet's most closely guarded secrets: the design and components that make it tick. If all goes according to plan, by the time the lines outside Apple Stores start to thin, iFixit will have provided a blow-by-blow account of its "teardown" to the world, complete with a photo montage.

Such details are manna for the Apple faithful, and iFixit has made a name for itself in technology circles by providing them fast. To do so, Wiens and Soules must above all make sure they are among the very first people to be in actual possession of these hotly anticipated gadgets. And this being Apple, one of the world's most secretive companies, each launch presents a different set of challenges.

Apple's mostly unsung suppliers, which are barred from talking about their most famous customer, will admit in private that they love these teardowns by iFixit and others. The spectacles trumpet to the world that a manufacturer is good enough to make it into an Apple product. In late 2006, the mere rumor that a component by Skyworks Solutions would be in the original iPhone was enough to boost its share price.

Perhaps not surprisingly, Apple, which declined to comment for this story, does not like anybody monkeying around with its devices. This after all is a company that won't even let users change their iPod and iPhone batteries. It has fired executives over leaks and sued bloggers to halt their revelations.

But there is nothing Apple can do about teardowns. "What we do is completely legal, but if they could stop us they would," Wiens, 26, said with a touch of pride. He said that iFixit has had no formal contact with Apple.

What Apple can and does do is make its devices tougher for him and others to decrypt. Teardown firms say the electronics giant forces some suppliers to stamp their microprocessors with the Apple logo, making it harder to determine their provenance.

"Apple is usually trying to cloak who its suppliers are," said David Carey of UBM TechInsights, a prominent teardown firm. "But it can only keep the door closed for so long."

One reason Apple frowns upon teardowns, say experts, is that it is reluctant to broadcast that it doesn't manufacture the widgets itself. "Apple really wants end users to think that Apple makes this thing, that Apple makes the iPad, not Foxconn, Samsung, Toshiba," Soules said.

REBELS WITH A CAUSE

For iFixit, these techno-stripteases are more than just publicity stunts designed to promote its business (though they are that for sure.) They are also, to hear Wiens and Soules tell it, a cause.

The two businessmen say one of their goals is to cut down on electronic waste that ends up in landfills by demonstrating the old-fashioned virtue of repair, extending the lifespan of devices.

Wiens said it was his mission to make repair "sexy." He refers to Apple as a "closed company," because it doesn't want its users repairing its products. "We used to fix things in this country, back in the 1950s it was cool to tinker with your car, but that changed as it became more of a consumer culture," he said.

Wiens and Soules launched iFixit, which sells Apple parts and provides free online repair manuals, as teenagers in 2003 out of their college dorm at California Polytechnic State University at San Luis Obispo. It is now a thriving small business that employs around two dozen people and generates more than $2 million in annual sales.

With so much riding on getting hold of the iPad first or close to it, iFixit is playing the odds, flying representatives to multiple cities that Wiens and Soules are keeping to themselves for the moment.

If past is prologue, there is little they won't do to be among the first. In 2008, the year Apple debuted the second-generation iPhone in a global launch, Soules chased it 6,000 miles to the first time zone where he could find the device. He flew to Auckland, New Zealand, and headed to a Vodafone store. There, he waited on line for more than a full day. By his count, he was the fourth person in the world to get the iPhone.

There was just one problem. Soules, a soft-spoken, baby-faced 25-year-old who could easily pass for 16, didn't know a soul in Auckland. So iFixit combed its client list and found one helpful fellow who offered up his print shop to host the teardown. It began shortly after midnight and lasted all night, with Soules streaming nearly live photos onto the Internet to waiting Apple fans half a world away.

Last year was even tougher. Wiens traveled to Britain to get ahead of the third-generation iPhone launch. But his scheme was foiled, he said, when a carrier store in France began selling the device at midnight. He was not among the first to get it -- a failure that still rankles. "There's no magic formula to this, we make up a new plan with each launch, and sometimes it doesn't work out."

DECONSTRUCTION DERBY

The iPad is Apple's most high-profile product launch since the iPhone three years ago. Starting at $499, the 9.7-inch iPad represents a new category of device, an always-on, all-purpose tool for media consumption.

Stores are sure to be packed on launch day, but Wall Street is still debating its long-term impact on Apple's bottom line. Many analysts expect the company to sell 4 million to 5 million iPads this year.

Whether the iPad flops or becomes the next big thing, the competition to accurately divulge who made which microprocessor and sundry other parts will be fierce.

"There are a lot of people doing this now," said Carey of UBM TechInsights. But he said all teardowns are not created equal. "There are different levels of audience and sophistication, and we have tools and lab capabilities that let us drill down to the transistor level."

Indeed, TechInsights' report on the iPhone 3G provides a level of detail only engineers could love, describing the pin counts on diode arrays that measure a millimeter in length and cost 3 cents.

In contrast to iFixit, which makes public its teardown information, TechInsights provides its data to paying clients. Its reports can run 200 pages. While speed is important, Carey said, it is not the main concern.

Teardown firms like his are hired by an array of clients throughout the technology foodchain. The data is used for competitive intelligence, in patent disputes, or by those simply looking to stay current on industry benchmarks.

Stripping down a device can last a week or more, requiring a variety of tools. Just opening an Apple gizmo can be tricky; the first generation iPhone, in particular, was sealed up tight enough to frustrate Harry Houdini.

"Apple thinks of the iPhone as a magical black box," said Wiens. "They hate screws."

Besides heat guns for melting seals, suction cups for maneuvering screens, and a small hooked stick called a spudger, some less conventional instruments sometimes come into play. "It turned out the best tool to take apart the original iPhone was a dental pick," Wiens said.

Identifying certain computer chips takes some digital sleuthing. The Web is awash in lists of component serial numbers, so parts often can be tied to the manufacturer simply by plugging them into a search engine such as Google.

But divining the origin of other parts requires more expensive hardware such as X-ray machines or a scanning electron microscope, a desk-sized device that provides pictures at the nanometer level.

Chips are carefully sliced open, and then examined from the inside, a process that can take days.

Francis Sideco, an analyst with research group iSuppli, calls the process of identifying parts "doing triangulation." He said iSuppli expects to put out an iPad teardown analysis a few days after the launch.

"We like to get it right, we don't want to wait two weeks, but we do want to get it right," Sideco said.

There is only one iPad component that is known for certain: Apple has already announced that its very own A4 processor is the primary brains of the device. The chip is reportedly manufactured for Apple by Samsung.

ISuppli predicts that other chip suppliers will include Broadcom Corp and Texas Instruments Inc. Flash memory could come from Samsung and Toshiba Corp.

The iPad display and touchscreen are the most expensive part of the device, likely to be around $80. They are also the biggest engineering mystery, Sideco said. The iPad's screen measures 9.7-inches.

"Capacitive touchscreens are typically 3-to-4 inches, and increasing sizes is one of the biggest challenges. The display is key, and what it costs," he said.

CRACKING APPLE

In the past, iFixit's teardowns have turned up parts from companies like Wolfson Microelectronics Plc, Skyworks Solutions Inc, TriQuint Semiconductor Inc and Marvell Technology Group Ltd.

The team also discovered a small space in the iPod touch meant for a camera, although the device doesn't yet include one. They don't know what they'll find when they crack open the iPad, but they certainly plan to be among the first.

Wiens and Soules own homes next door to each other in Atascadero, a 15-minute drive north from San Luis Obispo. Soules' house doubles as an office for around 10 employees, as well as an Apple parts depot.

The house is an Apple geek wonderland, with a cat named Midnight prowling the halls. The decor is dominated by a life-sized suit of armor, and racks filled with parts for iPods, iPhones and Mac computers. A jaccuzzi-style tub in the bathroom doesn't appear to have been used in some time, as it is piled high with boxes.

Soules just shrugs when asked about the clutter, but he seems right at home. He got his first Mac when he was in first grade, and worked as a computer tech through high school. His grandfather fixed typewriters, so repair is in his blood.

Wiens' father ran a Harley-Davidson dealership, and he said Apple's cult appeal has a lot in common with that of the motorcycle maker.

"Mystery attracts attention, and Apple is a master at getting attention," he said. (Reporting by Gabriel Madway; editing by Jim Impoco, Tiffany Wu and Claudia Parson)

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Want to see the iPad? So do Apple store employees

(Reuters) - As Apple Inc gears up for the crush of customers expected for Saturday's iPad launch, employees who staff its retail stores are just as curious about the tablet as the fans who will line up outside.

Apple store workers say they have yet to see or touch the iPad, even though the launch is just days away and they are being trained and encouraged to talk about Apple's newest device with customers.

"We haven't seen it; we never do" before a product is launched, said one employee, who asked not to be identified because workers are barred from speaking with the media. "Every store employee I know, including the managers, they haven't seen it."

With its notoriously secretive corporate culture, Apple is loathe to circulate any iPads among retail troops ahead of the debut. Even in-store Apple repair techs -- known as "geniuses" -- don't yet know how to fix the gadget.

Since the iPhone launch in June 2007, Apple product releases have played out like concert tours, with fans sleeping in lines overnight and blanket media coverage that generates plenty of free advertising.

But amidst all the hype, the company's ethos of secrecy extends from its corporate perch in Cupertino, California, to its component suppliers and its network of more than 200 U.S. stores.

"We did not see or hold an iPhone until an hour before it went on sale," said a former Apple store employee. "We didn't know much more about it than people asking us."

Major products are usually unveiled by Chief Executive Steve Jobs at special media events, and most retail employees are kept in the dark until the devices are publicly available.

"There was really no word on anything," said another former store worker of the iPhone launch. "We saw a video of the keynote, and that was basically all you knew."

GUARDS AND DECOYS

The iPad is Apple's most significant product launch since the iPhone. Starting at $499, analysts estimate Apple could sell from 850,000 to 1.2 million units of the 9.7-inch touchscreen tablet in the April-June quarter.

Apple's U.S. stores will open at 9 a.m. on Saturday but the company has provided few details about the launch.

If the iPhone debut is any guideline, Apple will have guards and decoys in place to hold the iPad's secrets.

At one store, Apple arranged to have two pallets arrive the day before the iPhone launch, placing one in the manager's office and the other in the stock room, both under the watchful eye of security cameras. Staff said one was filled with iPhones and the other was a decoy to discourage nosy employees.

A former assistant manager at an Apple store was ordered to remain at work all night before the iPhone launch, and given strict directions that only managers were allowed to see the smartphone, right up until just before they went on sale.

"We were told to stay overnight to guard them, to make sure nobody broke in and got to them. It was all a bit insane, but it wasn't really surprising at the time," he said. "It did put me off a little, but then you would read about something being leaked and you realize why they did it."

Retail employees are in many ways the public face of Apple, charged with spreading the gospel about the company's products to tens of millions of shoppers every year. Store staff, including part-time workers, have to sign nondisclosure agreements and can be fired for talking to outsiders.

They are paid around $10 an hour for entry-level work to over $30 a hour for those who staff the "Genius Bars" where customers come looking for help.

Tech savviness is not necessarily the top priority when it comes to hiring, according to the former assistant manager. He said there was a running joke about "Gapple" because his store often mined The Gap casual wear retail chain for potential employees.

"We looked for people who were passionate about Apple, people who would be comfortable selling the product," he said.

Employees get a 25 percent discount on iPods and Macs, but none for the iPhone. Employees said they have not yet been told whether they will get a discount for the iPad.

One of the former employees said Apple stores were a fun, upbeat place to work, despite the strictness over secrecy.

"I understand why they do it. They give you just a little bit of a peek, just to tease you," he said. "It drives people crazy but at the same time it generates all this interest. It's human nature."

(Reporting by Gabriel Madway and Ian Sherr; Editing by Tiffany Wu and Richard Chang)

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VC fund for iPhone app developers doubles to $200 million

(Reuters) -Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers is doubling the size of its fund for iPhone application developers, as it eyes new opportunities with the forthcoming launch of Apple's iPad.


Kleiner Perkins said its so-called iFund investment pool now totals $200 million. The firm said the new money was not carved out from other funds, but instead represents fresh capital.

The iFund was originally launched in 2008 with a total of $100 million, which is now committed to 14 app development companies. Those companies have also raked in an additional $330 million from other investors, Kleiner Perkins said.

The iFund has invested in popular app companies such as game designer ngmoco, texting provider Pinger, and music discovery service Shazam.

There are more than 140,000 different apps available for Apple's iPhone and iPod touch, and Apple's App Store has proved to be an important sales driver for those devices.

Users have downloaded more than 3 billion apps, many of them free programs, covering a huge range of uses, from productivity tools to time-wasting entertainment.

Apple's iPad tablet is set to launch in the United States this Saturday. The device uses the same operating system as the iPhone and will be able to run almost all the same apps.

Kleiner Perkins partner John Doerr, a renowned figure in the VC world, said: "Saturday is just the beginning. IPad is where the revolution is happening."

Many app developers are already hard at work overhauling existing programs or designing new ones to take advantage of the iPad's 9.7-inch touchscreen.

Kleiner Perkins said the iPad will ship with 11 apps from iFund-backed companies, with 20 more in development.

Apple Chief Executive Steve Jobs said in a news release: "Kleiner Perkins has done a terrific job at finding, funding and supporting great iPhone app developers. We are thrilled that they are doubling the size of their fund, along with expanding it to now include iPad developers too."

(Reporting by Gabriel Madway and Poornima Gupta; Editing by Gary Hill)

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IPad to hit stores April 3

(Reuters) - Apple Inc said the first iPads will be in U.S. stores on April 3 and hit nine international markets later in the month, easing concerns that manufacturing constraints could delay launch.

The news sent shares of Apple surging as much as 4.3 percent to an all-time high of $219.70 on the Nasdaq, as analysts said the speedy international rollout could help build sales momentum.

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Apple sues HTC over phones with Google software

SAN FRANCISCO (Reuters) - Apple Inc sued Taiwan's HTC Corp, which makes touchscreen smartphones using Google software, accusing it of infringing 20 hardware and software patents related to the iPhone.

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Apple Tablet Video

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