Apple's iPad 2 to hit stores in latest test

SAN FRANCISCO Fri Mar 11, 2011 12:05pm IST

Customers wait in line to purchase the iPad 2 outside an Apple store in New York March 10, 2011. REUTERS/Lucas Jackson

Customers wait in line to purchase the iPad 2 outside an Apple store in New York March 10, 2011.

Credit: Reuters/Lucas Jackson

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SAN FRANCISCO (Reuters) - Apple Inc kicks off sales of its latest iPad on Friday, likely extending its lead in the burgeoning market while offering an important snapshot of consumer demand for tablet computing.

Nearly a year after the original proved a smash hit and inspired a wave of imitators, investors will be watching the turn-out for the U.S. release of the iPad 2, which Chief Executive Steve Jobs unveiled last week.

The release -- which as always will be closely scrutinized by fans and investors -- may be a litmus test for the overall appetite for tablets.

Apple may still be hoping for a repeat of April 2010, when thousands of people lined up to buy what was then a largely novel device with an uncertain market. But analysts say the 10-inch touchscreen iPad 2 has been improved incrementally, not reinvented wholesale. It is thinner, faster and adds a pair of cameras for video chat.

The benchmarks for the iPad 2 are clear. The first iPad sold 300,000 units on its first day, 500,000 in the first week, and crossed the 1 million unit mark in 28 days.

Given that the iPad 2 will be available in far more stores to start than was the original model, Wall Street would be surprised if the device fails to outpace its predecessor in the early going.

In addition to being sold at more than 200 Apple outlets in the United States, the iPad 2 will be available starting Friday in the stores of AT&T and Verizon Wireless, as well as Best Buy, Target and Wal-Mart.

Unlike last year, Apple did not take orders ahead of the release, so anyone wanting first dibs on an iPad will have to journey to a store. That may help bulk up store lines, providing Apple the buzz it craves and is expert at generating.

That buzz may prove important as rivals from Motorola Mobility to Research in Motion gear up for their own full-blown assault on the same market.

GROWING FAST

Tablet sales are expected to surge to more than 50 million units this year, with Apple capturing more than 70 percent of the market. The iPad 2 hits store shelves in more than two dozen additional countries on March 25.

Apple is releasing the second version of the iPad before many of its rivals have even brought their first tablets to market. Apple sold 15 million iPads last year, generating $9.5 billion in sales, and had the tablet market largely to itself.

The iPad remains the most affordable tablet on the market, starting at $499.

JPMorgan analyst Mark Moskowitz warned this week of a potential bubble forming in the market as early as this year, as Apple's rivals build far more tablets than consumers will actually buy.

He said supply could outstrip demand by as much as 36 percent in 2011 -- a whopping 17.2 million units.

Blackberry maker RIM and Hewlett-Packard are set to release tablets in coming months. Some analysts believe RIM and HP could provide Apple with some competition, because both devices offer unique software, and both have formidable sales channels.

And although Samsung and Motorola have launched tablets, neither appears poised to give the iPad a run for its money.

"The technical and form factor improvements of the iPad 2 stand to make it tougher for the first generation of competitive offerings to play catch-up," Moskowitz wrote in a research note on Wednesday.

(Editing by Steve Orlofsky)

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