'A little cannibalization' of Macs from Apple's iPad seen as 'a good thing'
Gene Munster with Piper Jaffray believes that over the next 10 years, the total tablet market will exceed that of the PC market in terms of units. And as consumers shift their traditional PC setup to include tablets, Apple is positioned on the forefront of the emerging market with its industry leading iPad.
Munster believes that some cannibalization of the Mac from the iPad is unavoidable. And even Apple officials themselves have said on numerous occcasions that iPad sales are likely to have eaten up some sales of Macs.
But with Mac sales continuing to grow and outpace the rest of the PC market, Apple executives have shown little concern over so-called "cannibalization" of the Mac by the iPad.
"If this is cannibalization, it feels pretty good," Apple Chief Executive Tim Cook, then the company's chief operating officer, said during a quarterly conference call in January of 2011.
Combined iPad and Mac sales are currently around $62 billion. Assuming "aggressive cannibalization" of the Mac by the iPad in the years to come, Munster sees the combined segments doubling in sales to $119 billion by 2015.
In calendar year 2012, Munster expects Apple will sell 66 million iPads, representing roughly two-thirds of the total tablet market. But while about 100 million tablets will be sold this year, research firm IDC estimates that the PC market will still be considerably larger, with 371 million units sold in 2012.
However, Piper Jaffray sees the tide turning in the coming years, with the gap narrowing in 2015 when total tablet sales reach 301 million, compared to 484 million PC sales. Munster believes that tablet sales could overtake notebooks by 2015, and exceed total PC sales before 2020.
Munster acknowledged that some may find the shift from Macs, with an average selling price of $1,262, to the iPad, which has an average selling price of just $559, as a negative for the company. But he believes that in the greater scheme of the overall market, it's a positive transition for Apple.
"At 1% share of the incremental PC units in 2015, Apple would generate $311 million incremental revenue," Munster wrote in a note to investors, "but a 1% share of incremental tablet sales in 2015 would generate $394 million in revenue."
Piper Jaffray has maintained its "overweight" rating for AAPL stock, with a price target of $910.
16 Comments
[quote name="AppleInsider" url="/t/150369/a-little-cannibalization-of-macs-from-apples-ipad-seen-as-a-good-thing#post_2118002"]Munster acknowledged that some may find the shift from Macs, with an average selling price of $1,262, to the iPad, which has an average selling price of just $559, as a negative for the company. But he believes that in the greater scheme of the overall market, it's a positive transition for Apple.[/quote] It's not that complicated: 1. Apple sells far more tablets than Macs, so even if the average selling price is lower, a growing tablet market works to Apple's advantage. 2. Margins are probably higher on the iPad 3. Network effects are not as strong with tablets as with PCs, but they exist. [quote name="AppleInsider" url="/t/150369/a-little-cannibalization-of-macs-from-apples-ipad-seen-as-a-good-thing#post_2118002"]"At 1% share of the incremental PC units in 2015, Apple would generate $311 million incremental revenue," Munster wrote in a note to investors, "but a 1% share of incremental tablet sales in 2015 would generate $394 million in revenue." Piper Jaffray has maintained its "overweight" rating for AAPL stock, with a price target of $910.[/quote] This looked strange at first since the PC market is far larger than the tablet market at this point (in dollars). But they're talking about CHANGES in sales for each market. Since the PC market is hardly growing at all and the tablet market is growing at double digit rates, the growth in the tablet market is much higher than the growth in the PC market (I think they've actually overstated PC market growth).
Proper use of the word "cannibalization" in a story on AI.
I'm impressed!
If cannibalization creates customers like me, it is a great thing. Go with a more expensive, longer life desktop and an iPad, rather than a MacBook pro. iPad gets replaced on a 2-3 year cycle, and the iMac on a 4-7 year cycle (arguably less based on use case). I am surprised of two things in this equation though: the lack of a server product, and the pushing of Exchange as an integral part of the enterprise solution. (Watched some of the iPad infomercial podcasts last night looking for some ideas...) Cloud storage is ok for some things, but we are getting more likely to in-source our email and messaging soon-- the cost of free is becoming too high. (Google seems to have stopped innovating, and the next wave of video communication might miss them.)
I suspect on net, the iPad is a positive for Mac sales. Sure, there are some Mac users who might delay a laptop upgrade in order to buy an iPad instead. But there are a lot more buyers of iPads who don't own Macs (mathematically that has to be the case, given the sales volumes). I suspect a nontrivial fraction of those non-Mac iPad buyers will first delay a purchase of a Windows PC, and then later make their next computer purchase a Mac (perhaps an iMac, since the iPad handles mobile needs pretty well for many folks).
A few weeks ago the wife and I went computer shopping. I was thinking about getting a MacBook air as I wanted a higher res screen than what my current MacBook has. Surprisingly, the wife talked me into getting 3 iPads instead of one MacBook Air. We still have the iMac and MacBook but will just stretch out their life a little bit more. Ultimately I suspect Apple will get more money rather than less out of our household. In this case cannabilization (sp?) is a good thing.