Analysts dispute talk of iPad’s impact on PC sales

Gregg Keizer
20 September, 2010
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The death of the PC industry at the hands of Apple’s iPad has been greatly exaggerated, according to analysts.

While it’s true that the iPad has cannibalised sales of PC notebooks, the trend is nowhere near the 50 percent or so that Best Buy’s CEO Brian Dunn noted in an interview with the Wall Street Journal, says Stephen Baker, a retail analyst with the NPD Group. (Dunn later called the reports “grossly exaggerated” on a Best Buy blog.)

“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,” says Baker . “In the future, in 2011, assuming that other tablets appear and the trend [in tablets] continues, cannibalisation is likely.”

In a survey that NPD has conducted but not yet released, the firm has pegged iPad cannibalisation of PC sales “in the mid-teens,” Baker says.

“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 adds.

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

Baker disputes that conclusion.

Notebook sales seem down – about 2 percent 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 says.

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,” says 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) , agrees with Baker – to a point.

In a survey report published last week, TBR claimed that 32 percent 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 cannibalisation going on, particularly of notebooks,” says Gottheil. “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,” says 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 email.”

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,” says 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 percent of the respondents, the tablet is number one, and a PC is secondary, Gottheil says. Just over 50 percent 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 says.

Only about 5 percent said that the iPad was their only computer-like device, a number Gottheil thinks is 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 says.

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,” says Gottheil. “As impressive as a notebook can be, it’s a compromise.”

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