iPad Gross Margins Will Impact Apple

Overall gross margins for the iPad may be lower than originally estimated and could result to a 1% downside to Apple's stock.
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NEW YORK (TheStreet) - iSuppli, a market research firm specializing in technology, has come out with a revised teardown analysis of Apple's iPad. It now estimates the bill of materials for the 16 GB Wifi iPad at $260 compared to its earlier estimate of $230. This implies that overall gross margins for the iPad may be lower than we had originally estimated and the consequence could be a 1% downside to the $267 Trefis price estimate for Apple's stock.


estimates that nearly 44% of the costs involved in the making of the iPad are related to its display, touch screen and other user-interface components.

We estimate that iPad's gross profit margin will be 55% for 2010 and will decline to 40% by the end of Trefis forecast period. However, the revised report implies that the iPad's gross profit margin for 2010 could be around 48%.

1% Downside to Apple's Stock if iPad Gross Profit Margin Declines to 48% in 2010

Although we forecast that the iPad's gross margin will be around 55% for 2010, there could be a downside of $2 (1%) to the $267 Trefis Price estimate for Apple's stock if iPad's gross profit margin declines to 48%, as suggested by the revised iSuppli report.

The potential impact of the lower gross margin is limited due to the small contribution of the iPad business to



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stock. As shown in our analysis below, we estimate that the iPad business constitutes only 4% of estimate for Apple's stock.

For additional analysis and forecasts, here is

our complete model for Apple's stock.


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