As reported today, Apple (AAPL) has finally solved the problem with selling iPad in China. Apple came to a new agreement with Proview (or, indeed, its creditors), where Apple pays $60 million to use the trademark in China.
This finally opens the Chinese market to the iPad, which should be good for several million units per quarter.
The iPad is far from being the most significant Apple product. The iPhone is presently close to 60% of Apple's revenues and more than 75% of its gross margins. However, being able to sell 2 million to 4 million additional iPads per quarter might still have an impact.
Taking into account the estimated iPad ASP, BOM, and gross margin ($558.6, $316, and $242.6, respectively), Apple's tax rate (25.2% last quarter), and the likelihood that the gross margin from additional sales will flow right through to the bottom line (except for taxes), we might estimate the impact of this news as follows. (Sources: for iPad ASP, BOM and gross, my own article; for Apple tax rate, the latest 10-Q).
2 Million Additional iPads Sold Per Quarter
This would be 2 000 000 x $242.6 x (1-25.2%) = $485.2 million x (1-25.2%) = $362.9 million in net profits.
With Apple having 945 million diluted shares, this means an EPS impact of $0.384 per quarter.
4 Million Additional iPads Sold Per Quarter
This would be 4 000 000 x $242.6 x (1-25.2%) = $970.4 million x (1-25.2%) = $725.9 million in net profits.
With Apple having 945 million diluted shares, this means an EPS impact of $0.768 per quarter.
I'd expect the resolution of the Chinese iPad problem to mean an added benefit for Apple's quarterly EPS within the range of $0.384 to $0.768. This compares to quarterly EPS estimates of $10.33 for the September quarter, so between a 3.7% and 7.4% increase in EPS from this effect. The $60 million cost is mostly immaterial.
Although the EPS impact isn't very large, it should mean a bevy of earnings estimates increases, which might have a positive effect on the stock.