iPad cannibalization talk crazy, says analyst

Just 12% of iPad buyers say they bought the tablet rather than a notebook

Apple's iPad hasn't materially affected consumer PC sales, as some have claimed, a research firm said today.

During the 2010 holiday sales season, only about 12% of iPad buyers abandoned a PC purchase to acquire the tablet, making cannibalization a minor factor, according to survey data compiled by the NPD Group.

The decline of consumer PC sales growth rates has a much simpler explanation: The huge numbers posted by PC makers in the aftermath of Microsoft's 2009 launch of Windows 7.

"We're comparing PC sales against a record high," said Stephen Baker, an analyst with NPD. "Yes, consumer notebook sales are down, but it's linked to that, not the iPad. The comparisons are to the best sales period in history."

Last month, other research firms, including IDC and Gartner, said global PC sales were down 3.2% and 1.1%, respectively. Gartner claimed that tablet sales -- the iPad makes up the vast bulk of those -- was one of the reasons why PC sales slumped.

Baker disagreed.

According to NPD's poll of iPad owners, only 12% bought the tablet instead of a standard PC during last year's holidays, a dip from the 14% who purchased an iPad in the first six months of its availability.

Most consumers haven't seen the need to buy a desktop or notebook PC because they purchased one in the past 12 to 18 months, Baker. "That's the reason why iPad sales haven't cannibalized PCs," Baker said.

What Baker called conventional wisdom -- that tablet sales eat into low-priced notebooks -- "is most assuredly incorrect," he said. It's the over-$500 Windows consumer notebook where PC sales have been hurt. From October 2010 to March 2011, sales of those notebooks fell by 25%.

Even Apple has argued that iPads have dented PC sales. "Yes, I think there is some cannibalization," said Tim Cook, Apple's chief operating officer, during a January earnings call.

While Baker refused to echo Cook, he did warn that iPads could shake up PCs, perhaps even the lowest-priced notebooks, within the next year or year and a half.

"The big challenge for [PC manufacturers] going forward with the iPad is for that second or third computer in the house," Baker said. "In the next six to 12 to 18 months, as consumers think about replacing the rest of their installed base of older PCs, people are going to start asking, 'What's right for me, another PC or a tablet?' That should give anyone in the PC business cause for concern."

If that happens, the mix of devices in the home would radically change. "There used to be two or three desktops in the home, now there's a single desktop and a couple of notebooks," Baker said. "But in the future, it may be just one notebook and several tablets."

The idea that the iPad has caused the consumer PC slow-down is understandable. "Usage tightly overlaps for the majority of people," said Baker, ticking off such things as email and Web browsing. "Most people don't move their notebooks or iPads very far, most people use them for the same kinds of things. It's easy to see why people have thought that the iPad cannibalizes PC sales."

NPD's survey also showed that consumers are passing on 3G-capable iPads, opting instead for the less-expensive Wi-Fi models. In the 2010 holiday season, for instance, the $499 Wi-Fi iPad accounted for three out of every four iPads sold at retail.

Mobile carriers -- in the U.S., that's AT&T and Verizon -- have had little luck selling the iPad, Baker said, noting that carrier stores accounted for just 3% of iPad sales during the holidays.

"The carrier stores have struggled with selling things other than phones," said Baker. "For tablets, the subsidized model hasn't really worked. Carriers aren't willing to subsidize tablets down to the price of smartphones, and customers aren't willing to pay more than that. They just do not see the utility in 3G connectivity."

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@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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