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Thursday, October 14, 2010, 10:30 pm PT (01:30 am ET)

AMD holding off on tablets, admits iPad cannibalizing notebooks

AMD Chief Executive Dirk Meyer weighed in on the iPad's impact on sales of netbooks and notebooks, surmising that Apple's tablet has cannibalized both. Meanwhile, the company is waiting for the market to develop before committing R&D resources to developing tablet processors.

The Associated Press covered Meyer's response to a question on tablets' impact on netbook sales during an earnings call Thursday. "Clearly, in the last quarter or two, the tablet has represented a disruption in the notebook market," said Meyer. "If you ask five people in the industry, you'll get five different answers as to what degree there's been cannibalization by tablets of either netbooks or notebooks."

"I personally think the answer is both, and given the pretty high price points of the iPad, there's probably some cannibalization even of mainstream notebooks," he continued.

AMD posted a loss of $118 million for the quarter, a slight narrowing of last year's third-quarter loss of $128 million.

According to Meyer, the tablet opportunity is a long term one for the Sunnyvale, Calif., company, which is second only to Intel in shipments of x86 microprocessors. "Even though tablets like Apple's iPad are eating into demand for laptops, AMD will hold off on investing to develop microprocessors for that market until it grows more," Reuters reports Meyer as saying.

"Frankly we're still so small in the notebook market that given all of the opportunities in front of us it doesn't make sense for us to start turning R&D dollar spending towards the tablet market yet," he said.

Meyer is the latest of several high-profile CEOs to warn investors about the so-called "iPad effect." Last month, Best Buy CEO Brian Dunn caused a stir when he hinted that some sales of netbook models at the retailer had dropped off as much as 50 percent since sales of the iPad began. Dunn quickly retracted the comments, jesting that "the demise of these devices are grossly exaggerated." Earlier this week, Intel CEO Paul Otellini conceded that the iPad and other tablets may be chipping away at PC margins.

Third-quarter sales figures published this week by IDC and Gartner corroborated the impact of the iPad on the PC market. According to IDC's calculations, Apple overtook Acer to claim the number three position in the U.S. market. Number one HP saw lackluster growth of 2.7 percent, while second-place Dell saw shipments decline 4.9 percent year over year.

The iPad effect seems to work both ways. "Apple's influence on the PC market continues to grow, particularly in the U.S., as the company's iPad has had some negative impact on the mininotebook market," said Bob O'Donnell, IDC vice president for Clients and Displays. "But, the halo effect of the device also helped propel Mac sales and moved the company into the number three position in the U.S. market."

According to Gartner, sales of low-priced notebooks and mini-notebooks slowed over the quarter after several years of very strong growth. Mikako Kitagawa, principal analyst at Gartner, sees the buzz surrounding Apple's iPad as a contributing factor to the recent slowdown in netbook purchases. "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," Kitagawa said.

Unverified reports have suggested that Apple and AMD might have a partnership in the works. In April, unconfirmed rumors surfaced that the two companies' executives were meeting to discuss plans to use AMD microprocessors in some of Apple's forthcoming products.