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Tuesday, April 05, 2011, 05:20 am PT (08:20 am ET)

PC sales start slow in 2011 while market is 'usurped' by Apple's iPad

Following a blockbuster start to sales for Apple's iPad 2, sources in the Far East PC supply chain have reportedly indicated that PC sales have seen "weak demand" to start 2011.

PC sales continue to grow, but at a slower pace than expected, according to Deutsche Bank analyst Chris Whitmore. In a note to investors on Tuesday, he cut his PC unit growth, excluding tablet sales, for 2011 to a 4 percent year over year increase, compared to his previous prediction of 9 percent.

While PC sales saw a significant reduction in estimates, Whitmore boosted his 2011 tablet sales forecast to 45 million, up from 40 million. And he sees the lion's share of those tablets — 35 million — being sold by Apple.

"We remain skeptical whether the likes of (HP), Dell, Motorola, Samsung and RIMM etc can close the competitive gap on iPad 2," he wrote. "Specifically, iPad challengers must either undercut on price (negative margin implications) and/or offer a superior user experience.

"In aggregate, we believe iPad will remain dominant with 70% market share. Our tablet unit estimate remains below Consensus due to our concerns that non-iPad tablets will underwhelm."

Tablet sales have apparently had the greatest impact on the consumer notebook market, which Whitmore said is being "usurped" by Apple's iPad. His checks overseas indicate that iPad "cannibalization" of traditional PCs, or the percentage of buyers using the device as a notebook replacement, is north of 30 percent.

"Apple remains the primary beneficiary of this technology transition which is increasingly coming at the expense of PC vendors (Acer, HPQ, etc.)," he wrote.

Whitmore seems the same trend away from PCs and toward tablets and smartphones continuing in 2012, when he expects a total of 70 million tablets to be sold, up from his previous estimate of 60 million. And in calendar year 2012, he sees PC sales growing 7 percent year over year, a decrease from his prior forecast of 8 percent.

Deutsche Bank has also increased its price target for AAPL stock to $450, and accordingly cut its price target for Dell to $18 and HP to $40.

Deutsche Bank


Soon after the iPad launched in 2010, surveys immediately began to find that users saw the touchscreen tablet as a potential replacement for their notebook PC. Accordingly, there were signs throughout the year that the iPad was having a significant impact on PC sales.

That effect has carried over into 2011, as rival PC makers look to replicate the success Apple has had with the iPad. Netbook maker Acer was caught so off-guard by the iPad that the company recently parted ways with its CEO and announced its intentions to overhaul operations.