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Apple's Best Buy distribution changes iPad unit calculus

Apple's iPad lands at Apple stores and Best Buy's distribution will be riding shotgun. The double-barreled distribution channel for the Apple iPad may change the calculus behind Wall Street's unit guessing game.

Special Report: Apple iPad
Apple's iPad lands at Apple stores April 3 and Best Buy's distribution heft will be riding shotgun. The double-barreled distribution channel for the Apple iPad may change the calculus behind Wall Street's unit guessing game.

Just in case anyone in the tech world forgot, Apple issued a statement noting that the iPad lands April 3. Apple CEO Steve Jobs said that company couldn't "wait for users to get their hands and fingers on it this weekend."

None of that is new, but the key line in the statement boils down to three words. The iPad will be available in "most Best Buy stores."

Best Buy means a bigger mass of consumers for the iPad---even if you assume some supply problems out of the gate. It's unclear how many Best Buy shoppers will pull the trigger on a purchase at first sight, but it's likely that:

  • Folks will visit Best Buy out of curiosity;
  • They will get to play with the iPad;
  • They will tell their friends;
  • And Apple will expose the iPad to a lot more people than it would if the device merely went through the company's retail channel.

To wit: Having the iPad at Best Buy changes my personal calculus. For instance, I don't have an Apple store all that close to my home. It's Easter weekend, the weather is supposed to be good and there was no way I was going to travel far to go to an Apple store. When it's 70 degrees and sunny vs. a gadget, the nice day wins every time. Enter Best Buy. I have one of those 5 minutes away. My time investment is minimal and I'll definitely check out the iPad.

Simply put, it's all about distribution. The big question is whether this distribution is lumped into Wall Street's iPad guesstimates. The short answer: Probably not.

  • Morgan Stanley via Digital Daily expects Apple to ship 2.5 million iPads between March and May. That's up from an estimate of 750,000 for the June quarter. Morgan Stanley now expects 8 million to 10 million iPad shipments in calendar 2010, up from 5 million.
  • Barclays Capital expects Apple will sell about 5 million iPads in calendar 2010 with 1.2 million in the June quarter.
  • Macquarie Research estimates 4 million iPads to be sold in calendar 2010.

All of these iPad estimates will move dramatically higher with Best Buy, which just reported strong earnings. Macquarie analyst Richard Choe wrote in a research note on March 19, well before the Best Buy plans came to light over the weekend:

While Apple has noted some sales through select authorized resellers, third party distribution will be limited early on and we do not model any sell-in units for F2Q10 (March qtr).

Best Buy changes all of that. Just based on distribution and Best Buy, Apple will move a lot more iPads. While analysts are raising Apple's estimates, they may want to increase Best Buy's targets too.