Tablet PCs Slowing, but Not Stunting, Netbook Growth: ABI

Tablet sales are rising as netbook shipments fall, but tablets' high prices may keep netbooks in the game. Apple's iPad starts at $500 - generally the cap for netbooks.

The Apple iPad and industry promises of several competing tablet PCs are slowing sales of netbooks, but they've hardly crushed the market for the lightweight PCs, according to ABI Research. The firm now expects 2010 to close with shipments of 11 million-plus tablets and 43 million netbook units.

In the Oct. 14 report, ABI analyst Jeff Orr called for some perspective on the netbook side, describing the shipment of 43 million units as "good growth, just not the meteoric pace of the past couple of years."

Between the third and fourth quarters of 2008, netbook shipments rose by 160 percent. In 2009, shipments increased by 103 percent over 2008 totals, with 33.3 million units shipping. Keeping netbooks in the game, said the ABI report, is the still-high pricing of the tablets. The Apple iPad, for example, is priced between $500 and $830, while $500 has generally been considered the pricing cap for netbooks.

"Apple has sold a few million iPads in the first quarter, which is great for creating a new market," said Orr. "But early adoption of media tablets is not outpacing netbooks. The iPad average selling price above $650 isn't driving mass adoption. Competition, especially on price, is needed."

And competition the iPad will get. Samsung will begin selling its Galaxy Tab tablet, a follow-up to its Galaxy line of smartphones, through all four of the country's major wireless carriers later this year. According to the Boy Genius Report, Sprint plans to price the Galaxy Tab - which runs Android 2.2 and features a 7-inch touch screen - at $399 with a two-year contract and to roll it out Nov. 14. Extending the device's reach - and the competition for Apple - ABI reports that Vodafone plans to offer the Galaxy Tab in the UK and NTT DCOMo will offer it in Japan.

Hewlett Packard also has two tablets in the works, one running a Microsoft OS and the other Palm's WebOS, and Lenovo will launch the LePad this year, which runs Android. PC maker Dell has rolled out a 5-inch Streak tablet and introduced a 7-inch version, again running Android. And for the enterprise market, Research In Motion recently introduced the PlayBook.

While ABI's Orr believes tablets for now offer a use-case that's "almost entirely consumer based," and that won't replace laptops or smartphones in the enterprise, the PlayBook's model may give it traction.

"RIM's new PlayBook tablet may be more palatable to IT managers because at this point it's not a standalone device," he said in the report. "It needs to be paired with a BlackBerry."

The ABI report states that the drop in demand for netbooks "may be laid at the feet of the potentially-competitive media tablets." Potentially, however, is the operative word, as for now it's the promise of tablets that has slowed sales and not the devices themselves.

On Oct. 13, Gartner and IDC each released PC shipment figures for the third quarter of 2010 and reported that consumer sales were sluggish, as non-students held off on their purchases. While tablets don't replace primary PCs, Gartner's Mikako Kitagawa said her report, "At this stage, hype around media tablets has led consumers and the channels to take a -wait and see' approach to buying a new device."

Despite the tablets' ability to slow PC and netbook sales, ABI's Orr added, they're still nowhere near meeting the 40 million to 50 million annual units necessary to qualify as a "mass market product." A title that netbooks, for now, proudly wear.