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iWork suite for iPad projected to earn Apple $40M a year

A "rough" estimate of sales of the iWork suite of applications for the iPad predicts that Apple could reach more than $40 million a year in sales of its mobile office software.

Silicon Alley Insider on Monday suggested that Apple has already earned more than $3 million in sales from Pages, Keynote and Numbers, which cost $10 each. That total was based on discussions with developers who have had applications in the top 10.

The report assumes that a top paid iPad application sells about 7,500 copies on a Saturday or Sunday, and about 2,500 on a weekday. Since the iPad debuted in early April, the three iWork applications have remained among the top selling software on the App Store. And priced at $10 each, the applications have also paved the way for other software to have a higher price than the bargain $0.99 applications that dominate the App Store for the iPhone and iPod touch.

With estimated revenue of $825,000 per week, that works out to more than $40 million a year earned from the three applications, assuming sales maintain the same pace. Of course, sales could go higher too, as currently the iPad is only available in the U.S. Apple has just begun accepting preorders in nine additional countries in preparation for a May 28 launch. Nine more countries will have iPad availability come July.

"It shows there is a real appetite for serious apps on the iPad, a device that many have shrugged off as a toy," author Jay Yarow wrote. "It also suggests that Microsoft and Google may want to make sure their office suites — whether Web-based or apps — work well on the iPad."

For comparison, Silicon Alley Insider noted that Google generates about $50 million a year in sales from its Web-based office applications around the world, on a whole range of devices. The undisputed market leader, Microsoft, sells $4 billion of its Office suite each quarter, bringing in $2.6 billion of profit.

In addition to keeping all of the proceeds from its own applications, Apple also takes a 30 percent cut of paid software sold by third parties on the App Store. Apple has said that while the App Store has been very successful, it is not a big revenue generator for the Cupertino, Calif., company.

While iWork for the iPad has had a strong start, Apple has also found success with its iWork suite on the desktop, which saw a 50 percent increase in sales in 2009. The sales spike was credited to the $169 box set that includes Mac OS X 10.6 Snow Leopard, iWork and iLife.

The figure was estimated by SAI using sales reports by other top ten developers, and makes lots of assumptions about the run rate of app sales. It doesn't figure in the iPad's international expansion or the potential for iPad sales to either level off after satiating demand, or expand dramatically over the course of the year.

Software sales a small part of Apple's revenues

Apple reported net software sales of $634 million in the first calendar quarter of 2010, or roughly $2.4 billion per year, making software sales and particularly the $10 iWork apps a very minor part of the company's overall business, now reaching toward $50 billion in revenues. Still, Apple's ability to deliver its multitouch productivity suite on time at the iPad launch, and its decision to take on that task itself, indicate an interesting new direction for the company.

Apple's reported earnings for software sales include Mac OS X and its own applications, sales of third party software, as well as sales of AppleCare, MobileMe and other Internet services.

In contrast to its $634 million in quarterly software sales, Apple reported $3.8 billion in Mac hardware sales, $1.9 billion in iPod sales, $5.4 billion in iPhone sales, and $472 million in peripheral sales in the first quarter. Apple also reported quarterly sales of $1.3 billion in "other music related products and services," which includes iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.

Sales of iWork apps for iPad are therefore likely to be included in the company's reports for "other music related products and services" rather than being grouped in with its conventional retail software earnings.