Apple iPad Could Cannibalize PCs, COO Says

Apple Chief Operating Officer Tim Cook suggested the iPad could cannibalize the PC market, but would likely have synergy with the rest of Apple's product lineup. An outside research firm predicts an iPad refresh for April 2011.

Apple claims early demand for the iPad outstripped its predictions, and that the tablet PC could provide "synergy" with the rest of its product lineup, in contrast to past analyst claims that it could cannibalize demand for the company's other products. That perspective emerged during Apple's July 20 earnings call, which provided more hard data about iPad in its first three months of sales.

Apple sold 3.27 million iPads in the third fiscal quarter of 2010, helping fuel total revenues of $15.7 billion and a net quarterly profit of $3.25 billion. Both Mac and iPhone shipments increased during that period, although iPod sales continued their slow decline; Apple has long partially attributed the latter to cannibalization by the iPhone.  

"We went into the iPad thinking that planning of 1 million from our capacity was a very bold move," Tim Cook, Apple chief operating officer, told an audience of media and analysts during the company's July 20 earnings call. "A lot of industry analysts predicted that we would only sell somewhere around that number for the whole calendar year."

When the iPad ended up selling more than 1 million units per month, Cook added, it forced the company to readjust. "We're increasing capacity as quickly as we can," he said. "There are a number of things that we have to increase in order to do that. But I am fairly confident that we will be able to increase the capacity."

While some analysts have predicted that the iPad will eat into the market for iPods and Macs, Cook tried to give a positive spin to the tablet's potential to cannibalize the rest of the company's product line.  

"Mac share is still low and so there is still an enormous opportunity for the Mac to grow," he said, "and certainly the more customers we can introduce to Apple through iPads and iPhones and iPods, there might be some synergy with the Mac there, and there might be synergy between the iPad and the iPhones and so on."

The iPad, he suggested, could ultimately prove more devastating to Apple's rivals.

"If it turns out that the iPad cannibalizes PCs that, I think, [that] is fantastic for us because there is a lot of PCs to cannibalize," he added. "It's still a big market."

Analyst firm iSuppli published a July 20 research note predicting that Apple would ship 12.9 million iPads in 2010, followed by 36.5 million in 2011 and 50.4 million in 2012.

"The key to continuing success will be how quickly Apple responds to issues as they arise and whether the company can align suppliers to meet demand needs," Rhonda Alexander, director of monitor research for iSuppli, wrote. "Apple's acceleration of its component demand indicates that the company has raised its iPad production target for 2010."

The iSuppli research note also predicts that Apple will refresh the iPad in April 2011, perhaps with an internal camera and additional screen sizes. The firm suggests that the iPad currently controls 84 percent of the tablet PC market, "and the device is expected to dominate through at least 2012."