iPad adoption in the enterprise gaining traction, but still early

Enterprise adoption of iPad gaining traction, but still early
We conducted our quarterly survey on adoption of the iPad in the enterprise. iPad adoption in the enterprise is still in its infancy, although it appears to be gaining some modest traction. We believe iPad adoption in the enterprise could become more meaningful over the next several years and iPhone acceptance in the enterprise and an improving OS should be a catalyst for the iPad.

Plenty of room to grow in the enterprise

12% (vs. 10% last quarter) of respondents use the iPad in their organization and another 13% (vs. prior 11%) expect to test/deploy iPad over the next year. See Figure 1. Respondents indicated that iPad utilization is selective within companies, with only 10% of employees approved on the device. We expect iPad acceptance in the enterprise to increase over time, although utilization will be selective (i.e. content viewers, not content creators).

Improving OS to help; enterprise cannibalization minimal

We expect enterprise functionality to continue to improve/evolve in newer versions of the operating system (iOS). iOS 4 included email and attachment encryption, multitasking, support for multiple Exchange boxes, SSL VPN support, remote device management, and distribution of enterprise applications bypassing iTunes. Cannibalization of traditional enterprise PCs still appears minimal – respondents expect only 4% (vs. prior 2%) of current PCs to be replaced by iPads, on average.

Expect solid F2Q11 results; some risks developing for 2H11
We raise our revenue/EPS estimates on higher iPads, slightly offset by lower gross margins (mix). We model F2Q11 revenue/EPS of $23.7bn/$5.76, vs. Street of $23.2bn/$5.33. We believe multiple tailwinds exist for iPhones/iPads,

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