Apple’s Chicago event: What the analysts are saying—updated

Chromebooks still rule the school, but…

Not many Wall Street analysts were paying attention. The independents, on the other had, gave it a lot of thought.

Rod Hall, Goldman Sachs: We don’t see these as material for our forecasts. Apple on Tuesday announced a new 9.7 inch iPad with Apple Pencil support staring at $329 ($299 for schools), with pencils costing a separate $99 ($89 for schools). Apple said the new device features the A10 Fusion chip with advanced sensors for AR support. The device is now available to order in more than 25 countries. We believe the lower price point and student discount should incrementally help iPad adoption particularly in schools.

Amit Daryanani, RBC: Catch’em while they’re young. We think the new education push is a timely and needed response to GOOGL making significant inroads through its low cost Chromebooks (starting $149) over past few years. As per a NY Times article, starting with a small market share in 2012 GOOGL grew to be the market leader shipping 7-8 million devices to schools (~3x of MSFT and AAPL). Today 50%+ (30M+) primary and secondary school students in the US use GOOGL’s education apps. While education market in itself may not be large in size or margins, longer term it does create an opportunity to transition users into a specific ecosystem, making it strategically important. We’ll see if AAPL’s renewed push into the market and differentiated features around AR, security and new apps, will help the company gain some of the lost ground. Outperform. $205. 

Gene Munster, Loup Ventures: Apple Education Playbook: Hardware, Software, Services… and Creativity. The main takeaway from today’s event is that Apple has a suite of hardware, software, and services that can be used by students, teachers, and administrators to optimize the education experience. At the core, is Apple’s belief that creativity in music, video, photography, and drawing can be a framework for advancing learning in STEM [science, technology, engineering, mathematics]. Apple’s initiatives in education have hit a headwind over the past five years as cheaper Chromebooks have gained more adoption in schools. We believe Apple and iPad are uniquely positioned toward creativity, while Chromebooks are better positioned for the utilitarian aspect of education (essays, spreadsheets, etc)… Our research suggests iPad is strongest in K-5 and Chromebooks are preferred 6-12. We don’t think today’s announcements change that dynamic.

Jun Zhang, Rosenblatt: New MacBook and iPads Targeting the Education Market. As expected, the new iPad 9.7-inch model is retaining the industrial design seen in previous models, but we note that we have not seen 3D sensing fea- tures in the iPad Pro at this event, likely suggesting to us that Apple is not yet ready for 3D sensing on a large screen device. We now believe Apple might launch the new iPad Pro with 3D sensing in Q3, but we maintain our iPad Pro production estimate of around 6 million units/quarter… Other than school teachers and students, we believe the average consumer did not walk away excited from the Apple event. Buy. $180. 

Ben Thompson, Stratechery: The meaning of better. To be sure, Apple showed some impressive things yesterday, particularly its offerings around creative applications. So many of the company’s examples and ideas, though, presumed an idyllic environment where everything in the classroom runs on Apple software and, crucially, where schools are rich and students backed by the sort of support structure that allows the creativity Apple is focused on to develop. The reality of education, though, can often be far different: many school districts are scraping for funds, many students are fending for themselves, and, crucially, those two realities are separated. That is, the buyers are not the users, which renders Apple’s most important source of differentiation — the experience of using its products — far less potent.

Ben Bajarin, Creative Strategies: Apple’s True Goal (and Underlying Strategy) For the Education Market. In my opinion, Apple doesn’t need to win the device battle in the classroom to get a win in education. What I mean is they don’t need to displace Chrome or Windows devices in the classroom as the things every student uses in a device 1:1 environment. What they need is for kids to see what is possible with iPad, around everyday assignments, and for them to believe iPad is the only tool to create such compelling stuff. Perhaps then, over time, Apple can win over the decision makers of hardware to at least start deploying at least one or two iPad’s in the class so kids can start sharing and creating on it in ways they can’t on other devices… I believe this effort will start with teachers. Which is the main reason, I believe, Apple’s first attempt to change the narrative around iPad will include a focus on getting teachers on board with what is possible with creativity on iPad.

8 Comments

  1. Richard Wanderman said:

    As I commented on your earlier post about this, Google and the Chromebook, which have now been entrenched in schools for many years, are going to be hard if not impossible to push out.

    It’s less a matter of cost, more a matter of the fact that teachers and school systems have already built an entire digital curriculum around Google apps and it’s working and a Chromebook is an inexpensive “dumb terminal” that can log into a student’s work which is being held in the cloud.

    I love the iPad and I think it’s a great tool for this market, but I think Apple may have missed this particular boat.

    In the old days, I was the person who Apple sent into school systems to show them how to use the (early) Mac as a writing and organizing tool. In those days it was an easier sell because there wasn’t a lot one could do with a personal computer and it was easier to do those things on a Mac. Then PC clones undercut Apple on price and Apple never got a foot back in the door.

    Now it’s less a matter of price, more a matter that Google / Chromebook systems are already in place and working and are still less expensive than Apple’s new inexpensive iPad.

    I’m not sure Apple ought to be going after this market (anymore). Better to go after the college and university market with iPads and laptops.

    2
    March 28, 2018
  2. Ken Cheng said:

    Yep, hard to dislodge cheap in the K-8 range, but HS and college is where iPads and MacBooks dominate.

    2
    March 28, 2018
  3. Gregg Thurman said:

    Following up on my earlier comment about the importance of education.

    The creative professional saved Apple’s ass during the dark days of the ‘90s. But it was the iMac, iPod and iPhone (none of which was targeting the creative professional) that returned Apple to greatness.

    Today, creative professional revenue accounts for less than 4% of Apple’s gross revenue. I dare say the non-creative enterprise is responsible for far more.

    Education bought MSFT (aka Windows) because it was the standard in the Enterprise AND it was cheaper than Macs. Today the Enterprise is not “locked into” Windows any where near like it used to be. Employees and CEOs alike are telling IT what they, and getting it, even when their desires conflict with the bean counters and MSCE types.

    Swift and other initiatives, aimed at 9-12 and higher, will drive users to Apple products, not price alone.

    Macs
    IPads
    IPhones
    Apple TVs
    Apple Watches
    Apple Music
    HomePod
    Apple video content
    Emerging AI, AR and VR technology
    All linked together via a common OS framework (think “Continuity”)

    With that model and control of all the components to a connected home, Apple will be able to do things it’s competitors cannot. Apple’s competitors may be able to do some of it (maybe even better than Apple), but who wants to try to glom together products with varying degrees of quality, user interfaces, design, ecosystems and OSs to recreate Apple’s unified approach?

    0
    March 28, 2018
    • Richard Wanderman said:

      One nit to pick. Apple both supports and then drops support for creative professionals and has been doing this consistently since the desktop publishing days of pagemaker on 512K Macs.

      Apple can’t seem to settle into a long term strategy for this group. I think K12 is a bottom feeder’s low margin market and that’s fine, until Apple can comfortably compete they should let it go.

      Apple does best making devices and solutions for individuals, not institutions.

      1
      March 28, 2018
  4. Jonny Tilney said:

    Thompson nails it with ‘the buyers are not the users’. Until the buyers wake up and appreciate the differences it will be slow going as price trumps experience or quality.
    Some students will be the lucky ones and hopefully those schools will get the best results. For the others they’ll aspire to the something better.

    0
    March 29, 2018

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