Apple could make hundreds of millions in school deal

The tech giant is selling each iPad at a higher price than its retail cost.

By Benzinga Jun 20, 2013 11:51AM

The Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris/Bloomberg via Getty ImagesBy Louis Bedigian

The Cupertino, California tech giant has persuaded the Los Angeles Unified School District to purchase iPads for all of its campuses.

According to the LA Times, Apple (AAPL) will earn $30 million on the deal, which consists of iPads that will be sold for $678 each.

This is considerably more than the retail prices of both the 16GB ($499) and 32GB ($599) models. Apple has reportedly justified the added expense because it pre-loaded each tablet with educational apps, the details of which were not revealed.

Today's $30 million pay day is just the beginning.

"…By choosing Apple as the sole vendor, the district also made a de facto commitment to spend hundreds of millions of dollars with the Cupertino, Calif.-based digital giant over the next two years," LA Times' Howard Blume wrote.

Microsoft (MSFT) fought against the all-inclusive Apple deal, arguing that by signing with just one company, Los Angeles schools would miss out on industry price cuts, future (non-Apple) innovations and other potential benefits that competing tablets may offer. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

With a vote of six to zero from the Board of Education, however, the deal is all but guaranteed to proceed as planned.

At $678 per tablet, Apple will sell more than 44,200 units to Los Angeles schools ($30 million revenue / $678 unit price = 44,246 units). In addition to the "hundreds of millions of dollars" that could be made over the next 24 months, third-party manufacturers could also benefit by selling accessories to the school district. Older students, for example, might need keyboards for their tablets, which Apple does not provide.

This is just one of many major corporate and education deals that Apple has signed over the last several years.

In February, Apple made headlines when it secured a massive deal with Home Depot (HD). The home improvement retailer purchased 10,000 iPhones in order to replace the aging BlackBerry (BBRY) devices that were previously employed.

Needless to say, this did not have a positive effect on BlackBerry's shares, which plummeted more than 4% after Home Depot confirmed that the company was making the switch to iOS.

This switch came after BlackBerry released its long-awaited mobile OS, BlackBerry 10.

Meanwhile, the LA Unified School District did not seem to be interested in delaying the vote until after the next versions of Android, Windows 8 and Windows RT are unveiled.

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Jun 20, 2013 1:08PM

$30 mil and the same amount won't even be able to read when they graduate. Shame on you LA schools.


Dumbing down kids with itoys.


The ipad is obsolete, can you say netbook, what libtards.


Maybe in 3 years they will buy the next fad and repeat the idiot cycle.

Jun 20, 2013 1:34PM
Don't have the money to keep teachers teaching, only 40% of students graduate, but they can spend money on "toys"....awesome.
Jun 20, 2013 2:42PM
This is one of the MOST irresponsible waste of money, particularly in a state where better control of finances is desperately needed.  First, if tablets are really that necessary to improve higher learning, why couldn't they at least explore Amazon Kindle tablets at a fraction of the cost?   I predict this will go down in history as one of the biggest educational blunders.  I can only imagine how much corruption is really behind this where someone is getting "paid off" to make such an economically irresponsible decision. 
Jun 20, 2013 1:37PM

Every kid in LA with an ipad, I expect to see lot's of them getting robbed and killed for them.

Every criminal now knows an ipad is in some little kid's backpack.

Jun 24, 2013 11:04AM

I just paid $135 for a new 10.1 svp tablet with 4.1 ics that will perform about the same as these apple tablets.  What an absolute waste of money.  Most of these tablets will be unaccounted for within the year anyway.

Instead of teaching kids to read, write and do math, the idiots at the school district buy them i-toys to play with on the internet.

Jun 20, 2013 12:44PM
Got to love Microsoft's view of themselves. At least they were not stupid enough to use the word choice.
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