iPads Cannibalizing Macs Will Make Millions for Apple: Piper

Apple says it doesn’t worry about iPad sales eating into those of Macs. Piper Jaffray analysts offer data on why: By 2015, a 1 percent growth of tablets will yield $83 million more than a 1 percent growth in Macs.

Apple CEO Tim Cook once said that iPads €œcannibalizing€ Mac sales is something that Apple doesn€™t spend even a minute worrying about. Piper Jaffray analysts, in a May 30 research note, offered a good reason: Over the long term, iPads cannibalizing Macs will significantly benefit Apple€™s bottom line.

Over the next 10 years, the analysts expect sales of tablets, with the Apple iPad continuing to dominate, to surpass those of PCs.

€œWe believe Apple maintaining its majority (60 percent plus) market share in the ultimately larger tablet market is more important than meaningfully increasing single-digit market share in the PC space,€ despite the price of Macs being two and a half times higher, wrote analysts Gene Munster and Douglas J. Clinton.

This year, they expect total tablet sales to reach 99 million units, with the Apple iPad accounting for 66 million of those. The PC market is expected to ship 371 million units. In 2015, Munster and Clinton predict total tablet sales to reach 301 million units€”176 million of them iPads. The PC market, meanwhile, they€™re forecasting to reach 484 million units.

€œThus, the gap will be significantly closed between tablet and PC unit sales by 2015,€ states the report. €œWe believe tablets could overtake sales of notebooks by 2015 and total PCs well before 2020.€

Given the speed at which tablet sales are rising, by 2015, the analysts expect that the iPad€™s cannibalization of the Mac will shift to a net positive for Apple. Munster and Clinton explain:

Currently, if you look at the incremental tablet units sold year-on-year in 2012 and years beyond, tablet unit growth will far outpace incremental PC units. At 1 percent share of the incremental PC units in 2015, Apple would generate $311 million in incremental revenue, but a 1 percent share of incremental tablet sales in 2015 would generate $394 million in revenue.

Put another way, a 1 percent growth in tablets yields approximately $83 million more than a 1 percent growth in PCs.

If in 2015 Apple were to maintain its current 70 percent market share of the tablet space, they went on, it would see iPad revenue of $95 billion, versus 2012€™s $36 billion. More likely, however, is that its 2015 iPad revenue reaches $85 billion.

This year, combined iPad and Mac sales are forecast to reach $62 billion. €œAssuming aggressive cannibalization of the Mac,€ states the report, combined sales of the two will nearly double to $119 billion in 2015.

Apple€™s Cook has said his focus is on providing the right device for the right task. During Apple€™s April 24 earnings call, Cook added that Apple believes the opportunity for the tablet market €œis huge.€

€œThe iPad has taken off not only [among consumers] in a meaningful way but in education and in enterprise, and it's sort of everywhere you look now,€ he told media and analysts on the call. €œThe applications are so easy to make very meaningful for someone, and there's such an abundance of those that, as the ecosystem gets better and better, and as we continue to double down on making great products, I think that the limit here is nowhere in sight.€

The same might be said for Apple€™s bottom line.

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