Can the iPad 2 Smart Cover generate $1 billion in revenue for Apple?

Thu, Mar 17, 2011


Apple’s Smart Cover for the iPad 2 is pure Apple. It’s brilliant, simple, and just works. Apple hasn’t released sales figures for the iPad 2 yet, but you can bet that of the estimated 500,000- 1 million folks who purchased a new iPad this weekend, a good number of them also picked up a Smart Cover as well. While Apple won’t likely release Smart Cover sales figures – as they’ll probably end up lumped together with other accessories – Steve Jobs noted during the iPad 2 unveiling that Apple plans to sell a lot of them. And as a point of interest, the smart covers were, as you might assume, developed step for step along with the new iPad. Gotta make sure all those magnets align correctly, after all.

Seeing as Apple will inevitably play coy when it comes to Smart Cover sales, Horace Dediu took it upon himself to come up with his own estimate, namely that the new iPad 2 case may generate over $1 billion in sales for Apple in 2011.

Here’s how.

With an average selling price of $48 (weighted 70% for the polyurethane cover and 30% for the more expensive leather cover), Dediu anticipates that 60% of the 36 million iPad 2s sold in 2011 (itself an estimate) will be purchased alongside a Smart Cover. If accurate, Apple would sell 21.6 million units for a revenue gross of $1.04 billion. And assuming that the covers cost $12 to manufacture, that leaves Apple with $777 million in net profit from Smart Covers alone.

So is this possible? To be honest, who the hell knows. It would be helpful to know what percentage of iPad users even purchase a case to begin with. Most iPads I see out in the wild are completely exposed, though its possible that some owners use iPad cases exclusively at home for typing or watching movies. In any event, one can reasonably assume that the cool factor of the Smart Cover will prompt some users who wouldn’t otherwise purchase a case or cover to do so.

The $777 billion figure seems high, but every little bit counts, and you don’t amass over $50 billion in the bank unless you generate revenue streams from as many sources as you can. So however much Apple actually makes in Smart Cover sales will undoubtedly help bolster its already strong bottom line.

via Asymco


Comments are closed.

eXTReMe Tracker