Tuesday, February 21, 2012

Should Apple Make Available A Special iPad For School For Far Less? It Would Make A Lot of Sense and Doable (and Money For Apple)

First, let me say that what I’m predicting here is way in no way based on anything I’ve read or have been told.  This is just my own musing on how Apple can get iPads into the hands of million of students across the US or any other country that might be interested in giving their students the best opportunities that mobile computing can give today.  At the end of this post, I’ll reveal what I believe Apple can charge for it.

Each iTexbook for Apple is going to cost about $15 a textbook.  And from K-12, we are talking anywhere from 4 to 6 textbooks per pupil.  That’s comes out to about $60 to $90 per student per year.  And let’s suppose that each student will be assigned an iPad that is good for three to four years.  Maybe even five.

Now, let’s do the math.  At three years, that means the textbook revenue per student comes out to $180 to $270 per student.  Apple’s 30% is about $54 to $86.40 per student.  If you extend the iPad lease to 4 and 5 years, Apple’s cut becomes $72 to $115.20 and $90 to $144 respectively depending on the number of textbooks per student.

Apple can easily subsidized a price cut from the low-end $500 and really drive the price down a 9.7” iPad.  And with manufacturing cost going down year after year, there is more room for Apple it wants to go even lower.

At the end of it all, Apple can lease iPads on a 3-5 year basis and cut prices down to about $300 per iPad and make quite a bit of money still with revenue from textbooks helping to subsidize the cost.  Imagine a recurring upgrade of tens of millions (or hundreds of millions) of iPad every year for as long as iPads are needed to educate students.

Apple can will be able to count on its iPad to bankroll the company for decades to come.  Suppose Apple does adopt a plan similar to one that I am proposing, we already believe that Apple will keep the iPad 2 around even after it introduces the next iPad upgrade with a $100.  For schools, Apple can further achieve added cut from the textbook revenue and move the price even lower.

All the way down to $300.

Of course, it would have to be a packaged deal.  The school would have to be willing to lease the iPad and buy textbooks from the iBookstore in for Apple to drive the price this low.  Should the School choose only to go with the iPad, they can obviously settle for any educational discount or package that Apple offers.  And if the school or the student choose to, they can buy the iPad from the school or Apple for a low cost of say $100-$150 per iPad.  Everyone wins.

Making money from these student iPads aside, Apple will have achieve something that Steve Jobs dreamt of; revolutionize education.  And on top of that, legions of students, generation after generation of them, will grow up using Apple’s products.  iPads, Apple TV, and Apple’s mobile vision.

There simply is no company out there that could make this happen on such a scale in the tablet market except Apple.  And I believe Apple will make a $300 iPad available for schools and still manage to maintain a healthy profit margin.  After all, didn’t Apple jus tell Wall Street their margin was the best ever in the company’s history?

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