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The worst case: iPhone Air completely eliminates an iPad sale The big fear and the worst-case scenario is that the sale of something like an iPhone Air — which, given the current Samsung (NASDAQOTH: SSNLF ) Galaxy Note 3 prices should start at $299 with a 2-year contract (implying an unsubsidized price of $749 given the current iPhone 5s pricing). This means for what is likely to be at worst a slightly larger bill-of-materials than the iPad mini with Retina Display, Apple is making significantly more margin per unit. The worst case, then, is that Apple loses a flagship iPhone sale ($649) plus an iPad mini with Retina ($399) for a $749 hypothetical iPhone Air. Do note, however, that if users are going to really go with “one device to rule them all,” then they’re probably not going to buy the minimalist 16 GB model for $749 and would instead likely be willing to pay the $100-$200 premium to get 32GB to 64GB models. Apple could also conceivably sell a 128GB model that could appeal particularly to business users. The more likely case: cannibalization modest, smartphone share moves up meaningfully Assuming that there will be no cannibalization seems a bit optimistic, but a more realistic scenario where such an iPhone Air cannibalizes an iPad mini with Retina to some degree is likely (a 4.5 – 5.7-inch iPhone does not seem like a substitute good for a 9.7-inch iPad), but the cannibalization is likely to be minimal.
To get more detailed, visit the original resource on this page: http://www.fool.com/investing/general/2014/01/14/the-iphone-air-wont-kill-the-ipad.aspx
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