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Posted at 03:49 PM ET, 03/02/2012

The ‘iPad 3’: A breakthrough or a stepping stone?


A man walks past the Apple logo outside an Apple store in Shanghai February 28, 2012. (CARLOS BARRIA - REUTERS)
Apple’s official announcement for its March 7 media event at the Yerba Buena Center for the Arts in San Francisco was as simple as it was cryptic, “We have something you really have to see. And touch.” And, as usual, rumors that the launch would be for the “iPad 3” have swirled for months in advance, although Apple has not confirmed the name or specifications of the new product. But Apple watchers are convinced that the new tablet will be smarter, faster and better than anything we’ve ever seen, sporting everything from 4G wireless connectivity to an 8 megapixel camera and a faster quad-core processor.

Yet even Apple fans need to be asking themselves: Is it worth it to pay $499 (the initial market price of the iPad 2) for something like a new-and-improved Retina Display screen?

These changes, while nice, sound more like incremental rather than breakthrough innovations. In other words, the “iPad 3” is to the iPad 2 what the iPhone 4S was to the iPhone 4 — an interesting new product, but not exactly a next-generation one. And therein lies the problem — Apple has become a tech darling for its ability to outperform expectations and delight consumers. Since 2010, Apple has sold over 55 million iPad tablets because the company has consistently met already high expectations and surprised and delighted the digerati.

And that’s where things get interesting, because Apple is currently the belle of the stock market ball. The company’s stock price is up 32 percent this year, according to a Feb. 28 report by the Wall Street Journal’s Steven Russolillo. The rise is driven in large part by expectations of innovations such as a revamped Apple TV, the new “iPad 3” and continued global expansion to places like China. Apple is also on track to have a stock market capitalization of nearly $500 billion, according to Russolillo. He goes on to report that only only five other companies in the history of the U.S. market have reached that mark: Microsoft, Cisco systems, General Electric, Intel and Exxon Mobil.

The company is now worth more than some entire sectors of the economy, according to a Feb. 28 report by InvestorPlace’s Jeff Reeves. These sectors include utilities, materials and telecom. Comparing market capitalization to GDP, as Russolillo reports, Apple is now bigger than all but 19 countries in the world. Those are big numbers to live up to, especially since a company’s stock market capitalization is as much the result of expectations as current performance.

And yet, some — such as Robert Cyran of Washington Post sister site Slate — suggest that Apple’s market valuation could hit $1 Trillion. To accomplish this, of course, Apple must go beyond business as usual — routinely churning out incrementally new products each year. More than that, Apple has to convince investors that it has a vision for the future of technology and content that will prepare the company to fend off the advances companies such as Amazon.

The big wildcard is the potential for a simultaneous Apple TV and iPad3 launch. That would be big. That would be enough to convince people that Apple is doing more than just making a defensive block against Amazon’s Kindle Fire or the Samsung Galaxy Note, which generated buzz during this year’s Super Bowl. That would make the third time a charm for Apple and cement the company’s commanding lead in the tablet marketplace.

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By  |  03:49 PM ET, 03/02/2012

Categories:  Business, Dominic Basulto, Technology

 
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