Apple's iPad may cannibalize sales of devices such as iPods, handheld video game systems and MacBooks, according to new survey data generated by Alphawise, Morgan Stanley's internal research team. That data runs contrary to an earlier survey by Gene Munster, which suggested the iPad had cannibalized only a small portion of potential purchasers of an iPhone or iPod Touch. Other devices threatened by the iPad include e-readers such as Amazon.com's Kindle.
Apple's iPad may cannibalize sales of related devices, including notebooks
and the iPod Touch, according to a March survey by Alphawise, Morgan Stanley's
specialized internal research team. Some 44 percent of iPad owners surveyed
said they would forgo purchasing a notebook, while 24 percent said MacBooks and
20 percent said PCs.
consumer PC, and especially notebook growth decelerated in January when Apple
introduced the iPad and again in April when the iPad launched," Katy Huberty,
an analyst with Morgan Stanley, wrote
in a research note reprinted in Apple Insider on May 6
. "Given the corresponding
increase in [average selling prices] in the market, we believe much of the
demand shortfall came from netbooks and low-cost notebooks."
An accompanying chart produced by Alphawise suggested that, for Apple
owners, notebooks and the iPod Touch were most at-risk for cannibalization; for
non-Apple owners, e-readers and notebooks were most at risk. The introduction
of the iPad, which includes an e-reader application, has long been seen as a
direct competitive threat to Amazon.com's Kindle and Barnes & Noble's Nook
devices. Some 17 percent of non-Apple users also indicated that iPad ownership
would discourage them from purchasing a handheld video game system.
cannibalization data from Huberty and Alphawise runs somewhat contrary
an earlier research note from Piper Jaffray analyst Gene Munster, whose survey
of 448 iPad buyers soon after the device's April 3 release found that only 1
percent of respondents considered an iPod Touch before choosing the iPad.
Another 1 percent considered the iPhone.
However, in the intervening weeks a new trend could certainly have taken
hold among buyers of the iPad, which has sold more than 1 million units.
Chief Operating Officer Tim Cook confirmed during an April 20 earnings call
that the iPad had been priced "aggressively" to help establish a dominant
position in the nascent tablet PC market: "We want to capitalize on our first
mover advantage as we've done in other products."
Cook also suggested during the call that Apple was adding capacity to deal
with what he termed as unexpected demand. Overall, Apple's quarterly earnings
numbers came too soon to the iPad's release to see what effect, if any, the
tablet PC will have on the company's other product lines; while sales of iPods
have been steadily and slowly declining over the past few quarters, Apple
chalks that up to the iPod Touch cannibalizing the market for the traditional
Apple may soon find itself with bigger issues than whether its mobile
devices cannibalize market share. On May 3, a New York Post story suggested
that the company could find itself under scrutiny by either the Department of
Justice or the Federal Trade Commission. According to the article's unnamed
source, the focus of a potential inquiry would be Apple's mobile applications
policy, which forbids the use of third-party development tools in the creation
of apps for Apple's App Store; specifically, the government may look into
whether excluding applications built with tools such as Adobe Flash CS5
violates the rest of the smartphone ecosystem's ability to stay competitive,
given the popular nature of the iPhone OS.