On Monday, Trefis wrote a broad research report on Apple Inc. (NASDAQ:AAPL) and here at ValueWalk, we focused on comments about the iPhone 5′s margins to hit below 40 percent. There were many more topics and one of them was the key trend, the demand for e-readers and tablet PCs.
Trefis wrote the following about the trend:
“With Amazon Kindle and Apple iPad, the demand for e-readers and tablet PCs has increased at a rapid rate. The recent introduction of Kindle Fire and the Nook tablet saw huge orders being placed during the holiday season. At the same time, Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) and Motorola met dismal failures. We believe that the tablet market is still in a stage of infancy and as new competitors such as Dell Inc. (NASDAQ:DELL) emerge and older competitors improve on their existing tablets, the demand in this market segment is set to rise.”
This is an interesting trend as the Department of Justice has a case against Apple, alleging that the company conspired with publishers to increase prices and fight Amazon.com, Inc. (NASDAQ:AMZN)’s dominance of ebook prices. The company has disagreed with the allegations and said that it did not collude, but instead signed individual publisher agreements.
Apple Inc. (NASDAQ:AAPL) has also noted in court papers that the suit “sides with monopoly, rather than competition” by helping Amazon’s early advantage in the electronic books market, reported Reuters.
Apple has a civil trial set to start in June. The company has the support of Barnes & Noble, Inc. (NYSE:BKS). It has said to the Federal Court that it is worried about an Amazon.com, Inc. (NASDAQ:AMZN) monopoly.
Meanwhile, on Friday, Macmillan, one of the publishers in question, proposed a settlement with the government for the antitrust case accusing four other companies of conspiring to increase ebook prices. The company is the fifth and last US book publisher to settle; it is now awaiting both the settlement and the requisite approval from the judge in Manhattan’s US District Court.
The proposed agreement has Macmillan lifting restrictions on the discounting by ebook retailers; it must also contact the Justice Department when it communicates with fellow publishers.
The government had sued the five publishers April 2012. Three had settled right away, while Pearson PLC (NYSE:PSO) (LON:PSON) and Penguin Group, had settled back in December.
So with Apple Inc. (NASDAQ:AAPL)’s pending case, how will it affect Trefis’ aforementioned trend?
Tied into higher demand for e-readers and tablet PCs, Trefis has forecasted a price decline in Apple Inc. (NASDAQ:AAPL)’s older iPad versions.
Analysts wrote:
“After Apple released HD iPad in 2012, it reduced the pricing of the iPad 2 16 GB to $399. The Kindle Fire and Nook tablets were launched at $199 and $249 respectively and saw loads of buyers lining up for the extremely cheap tablets. As the tablet market matures and includes more price-conscious consumers, Apple Inc. (NASDAQ:AAPL) may be forced to bring down the prices of the future iPads as well.
The cost of ownership for the 3G/4G iPads can be even higher than the purchase price, since an AT&T/Verizon Communications Inc. (NYSE:VZ) data plan is necessary (in the US) for transferring data over 3G networks. For example, AT&T Inc. (NYSE:T) charges $15 for up to 200 MB of data per month, $25 for 2 GB of data per month and $45 for 4GB of data per month. In comparison, the Kindle Fire and the Nook do not come in 3G versions.”
Apple Inc. (NASDAQ:AAPL) is currently trading at $477.67, up 1.99%.
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