Analysts dispute talk of iPad's impact on PC sales

Too early to say Apple's tablet 'putting the hurt' on notebook sales

The death of the PC industry at the hands of Apple's iPad has been greatly exaggerated, analysts said today.

While it's true that the iPad has cannibalized sales of PC notebooks, the trend is nowhere near the 50% or so that Best Buy's CEO Brian Dunn noted in an interview with the Wall Street Journal, said Stephen Baker, a retail analyst with the NPD Group.

"Clearly, the iPad is a great product, but it's way too early to say that it's putting a significant hurt on the PC market," said Baker today. "In the future, in 2011, assuming that other tablets appear and the trend [in tablets] continues, cannibalization is likely."

Best Buy's CEO told the Wall Street Journal that internal company estimates had pegged the iPad as the cause for a downturn in PC notebook sales. Bloggers immediately seized on Dunn's remark.

Baker said that didn't wash.

"Just because one thing is happening doesn't mean another is causing it," he said, cautioning against jumping to the conclusion that the iPad was responsible for all the lost notebook sales that Dunn reported.

There are a host of other, more likely factors, Baker said, including a wealth of consumer electronics, including 3D televisions, new digital cameras and game consoles, that weren't available or as popular last year at this time. And while PCs were the consumer electronics choice in 2009, this year other options compete for dollars.

In a survey that NPD has conducted but not yet released, the firm has pegged iPad cannibalization of PC sales "in the mid-teens," Barker said.

"For the most part, [in the iPad] you're seeing a product that's an early-adopter product, has pricing at or above what a notebook costs, with a volume clearly not enough yet to worry PC makers," Baker added.

Other Wall Street analysts used NPD data -- which noted that U.S. notebook retail sales were down 4% in August compared to the same month last year -- to estimate that the iPad has chewed up about 25% of PC notebook sales since the tablet's April introduction.

Baker disputed that conclusion, too.

Notebook sales seem down -- about 2% when both July and August are combined -- not because of the iPad but instead because they're being compared to extraordinary numbers posted in the same months of 2009.

In other words, last year's robust sales will be nearly impossible to match.

"At some point, the gravy train [of PC sales] has to wind down," Baker said.

Other factors in play this year range from initial sales of Windows 7 tailing off -- "We're at the end of the Windows 7 bubble," said Baker -- to much less aggressive pricing by retailers for back-to-school sales, a period that traditionally sparks significant PC sales, especially of laptops.

Ezra Gottheil, an analyst with Technology Business Research (TBR) , agreed with Baker, up to a point: His firm's data shows a stronger connection between the iPad and lower notebook sales, but not to the extend claimed by Dunn.

In a survey report published this week, TBR claimed that 32% of iPad owners or consumers who said they would purchase Apple's tablet in the next six months said that they had bought or would buy the device to replace a PC.

"There's definitely cannibalization going on, particularly of notebooks," said Gottheil today. "But almost no one is giving up their main PC for an iPad."

Instead, consumers buy iPads rather than replace a second or third PC, most often a notebook or netbook, that has outlived its usefulness.

"PC makers have grown used to selling you not just a core PC, but one or two other ones," said Gottheil. "Rather than buy a new notebook, people are pulling one of those out of service and using an iPad for specific tasks, mostly Web browsing and e-mail."

By Gottheil's reasoning, people are turning to the iPad because they see the value of a device in-between a notebook and smartphone, both in size and use. "They've gotten into the habit of using more than one device, each for specific purposes," said Gottheil. "Instead of a using a notebook or netbook for that function -- browsing, for example -- they're using an iPad."

The TBR survey of 500 consumers also tallied large numbers of consumers who say that the iPad is their primary computing device.

For 44% of the respondents, the tablet is No. 1, and a PC is secondary, Gottheil said. Just over 50% flipped the two, saying that the PC was their primary computing device and their other device was a tablet.

"But that first group isn't saying that the iPad is their most important device, they're saying that they use it more than any other," Gottheil said.

Only about 5% said that the iPad was their only computer-like device, a number Gottheil thought suspiciously high.

"Consumers are not stopping PC purchases, they're just saying that the iPad means 'I don't need no stinkin' second PC or third PC,'" Gottheil said.

Even so, laptop sales may suffer in the future as the proliferation of PC alternatives, whether a tablet like the iPad or a smaller-screen smartphone, continues. "I think people will have one PC in their homes, not several, and very likely the tendency will be for that PC to be a desktop with a large screen," said Gottheil. "As impressive as a notebook can be, it's a compromise."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

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