Apple iPad Not Cannibalizing Notebook Market: Analyst

Apple's iPad is not cannibalizing the notebook market, according to an NPD Group analyst, who suggests that tablets will likely impact different segments of PC sales in 2011.

Reports of the Apple iPad cannibalizing the market for low-end notebooks have been greatly exaggerated, according to a new blog posting from an NPD Group analyst. That follows a weekend ruckus over comments attributed to Best Buy CEO Brian Dunn, which suggested the tablet was indeed eating into laptop sales.

"No one expected netbook sales to stay at the atmospheric levels of 2009 and in fact netbooks, as a percentage of U.S. consumer sales, have been very steady all year in the mid-teens," Stephen Baker, an analyst with NPD Group, wrote in a Sept. 20 posting on the research firm's official blog. "In light of the sales facts it is, in my view, a mistaken and absolutely untenable position to claim that PC sales are under pressure because of the iPad when there are so many other factors that are contributing to the poor results."

Baker references data suggesting that netbook sales for July and August-the peak of traditional back-to-school spending-have risen year-over-year by 6 percent. While that represents something of a decline from the past four years' double-digit growth, Baker added, "sales were most likely to plateau at some point ... the fact that this slowdown coincides with the release of the iPad (well sort of) is hardly proof of cause and effect."

Baker also points to the iPad's cost, as compared to that of netbooks, as another reason to dismiss the cannibalism argument. "It is hard to imagine that a flood of mass market consumers are switching from a product that has an average price of under $300 during [back-to-school] to one that had [an average selling price] of over $600 in Q2," he wrote. "That is not how mass market consumers' act, trading from a low-cost price segment to a high-cost one."

The market for tablets will "likely be strong in 2011 and impact different segments of PC sales at that time," Baker concluded, but "unless you have actual data making the claim that the iPad is destroying the PC market based on hearsay and innuendo is the worst case of rumor mongering."

Nonetheless, the idea of the iPad cannibalizing netbooks gained widespread attention late last week, after Best Buy CEO Dunn was paraphrased in The Wall Street Journal as saying the tablets had cannibalized more than 50 percent of their sales from laptops.

Ahead of the weekend, Dunn moved to refute those comments.

"The reports of the demise of these devices are grossly exaggerated," Dunn wrote in a Sept. 17 statement. "While they were fueled in part by a comment in the Wall Street Journal that was attributed to me, they are not an accurate depiction of what we're currently seeing. In fact, we see some shifts in consumption patterns, with tablet sales being an incremental opportunity."

His statement added: "As we said during our recent earnings call, we believe computers will remain a very popular gift this holiday because of the very distinct and desirable benefits they offer consumers."

Other analysts, however, seem convinced of tablet PCs' ability to affect the notebook market.

"We expect tablets to continue to pressure PCs as more vendors launch products (e.g., Dell Streak and Samsung Tab) and Apple expands its iPad distribution," Morgan Stanley analyst Katy Huberty wrote in a research note, as quoted by Fortune Magazine Sept. 17.

Huberty's research note uses data from NPD Group, which shows overall U.S. notebook sales declining 4 percent year-over-year for 2010. "Tablet cannibalization" is a significant factor in the dip, she supposedly wrote.

Other analysts agree with that assessment.

"Sales of traditional notebooks appear to be feeling pressure from the iPad, causing a scramble by vendors to launch iPad-like tablets," UBS analyst Maynard Um wrote in a Sept. 8 research note. "We believe that a majority of this impact is occurring on the lower end of PC sales as the iPad is priced close enough to this range that it becomes attractive to consumers looking to make purchases within this segment."

Um predicts sales of 28 million iPads in 2011, while Huberty pegs the overall tablet market as shipping 50 million units that year. The question is whether those burgeoning sales will truly result in pain for the notebook market.