3 Factors That Make the iPad More Valuable for Apple Than Macs

Mar. 3.10 | About: Apple Inc. (AAPL)

Apple’s (NASDAQ:AAPL) recently announced tablet PC, the iPad, is expected to create a new business line for Apple that is more valuable than its existing Mac desktop business. We estimate that Apple’s iPad business accounts for 4% of the $267 Trefis price estimate for Apple’s stock compared to about 3% for Apple’s Mac desktop business.

Below we highlight the three factors that make the iPad more valuable for Apple than Mac desktops:

1. Pricing gap between iPads and Mac desktops expected to narrow over time

We expect Mac desktops to be sold at an average price of $1,210 in 2010 compared to an average price of $600 for iPads. However, we believe the pricing gap will narrow over time due to Mac desktop pricing declining faster than iPad pricing.

We expect the average price for Mac desktops to be around $650 by the end of the Trefis forecast period, compared to iPad pricing of about $440.

2. Unit sales of iPads will exceed Mac desktops sold

We expect Apple to sell 4 million iPads in 2010 compared to 3.8 million Mac desktops. The unit sales gap is expected to widen over our forecast period with 12 million iPads sold by the end of the Trefis forecast period, compared to about 9 million Mac desktops desktops.

3. Gross margins for Mac desktops are lower than iPad margins

We estimate gross margins for Mac desktops to be around 30% in 2010 compared to the 55% gross margins that we expect for the iPad in 2010.

We believe gross margins for all Apple’s hardware products will decline over time and estimate that Mac desktops margin will reach 26% and iPad gross margins will reach 40% by the end of Trefis forecast period.

You can modify our forecasts for Apple’s iPad business above to see how Apple’s stock can be impacted based on how you think iPad pricing, sales and margins will trend in the future.

You can see details on our rationale for the iPad forecasts here: iPad Pricing, iPad Unit Sales, iPad Gross Margin.

Disclosure: No positions.