Apple trumpets iPad cannibalization

'If this is cannibalization, it feels pretty good,' says Apple COO about tablet's impact on laptop sales

Apple yesterday made its strongest statement yet that soaring iPad sales are affecting the laptop market, saying that the problem should concern its rivals.

"Was there any cannibalization by iPad?" Tim Cook, Apple's chief operating officer, said during a Tuesday earnings call with analysts. "Honestly, I don't know for sure. But yes, I think there is some cannibalization."

Apple sold 7.3 million iPads in the final quarter of 2010, more than two-and-a-half times the number of Mac laptops sold in the same period and almost double that of all Macs.

Last year, analysts debated the idea that iPad sales, and tablet sales generally, would cannibalize sales of notebooks and the even smaller, cheaper netbooks.

In May 2010, for example, Jeff Orr of ABI Research dismissed netbook cannibalization , while four months later, Stephen Baker of the NPD Group said it was too early to conclude that rising iPad sales and slowing netbook purchasing were connected.

More recently Gartner analyst Mikako Kitagawa said it was unclear whether cannibalization was taking place , arguing instead that people may instead be postponing upgrading their home machines, and spending the money on other things, including tablets or video game consoles.

Apple's Cook did not quantify notebook cannibalization, or even admit that it had affected the company's laptop sales.

Cook cited the strong sales of Apple's laptops last quarter to back up his point.

Sales of Apple's MacBook line increased by 37 per cent over the same quarter in 2009, fueled by the October introduction of a revamped MacBook Air. Apple's desktop and notebook sales combined to post a 23 per cent year-over-year growth rate, seven-to-eight times higher than the computer industry's average gains as projected by IDC (2.7%) and Gartner (3.1%).

"If this is cannibalization, it feels pretty good," said Cook yesterday.

Ezra Gottheil, an analyst with Technology Business Research, said cannibalization was part of Apple's strategy.

"There is cannibalization [of notebooks by the iPad]," Gottheil said yesterday in an interview after Apple revealed its record-setting fourth quarter numbers. "But Apple is intent to have that. They want people to be choosing between and among Apple products. The iPad also is the kind of product that when people buy one, they're more likely to later get a Mac."

According to Gottheil, Apple is trying to get consumers to think of their home as a place where there's just one personal computer -- likely a desktop -- in the house, which in turn is surrounded by multiple portable devices, whether those are smartphones, tablets or light-weight laptops.

Cook turned the tables on the cannibalization by claiming that the iPad generates a "halo" effect for the company's other wares. "As we've seen on the Mac by the iPod some years ago, I think there is a halo effect from Apple product to Apple product," he said.

The halo concept isn't new, of course. In May 2010, a month into the iPad launch, consumer analysts at a pair of firms attributed pops in Mac sales and usage to the publicity about the new tablet, and Apple's retail stores, where some customers checked out the tablet but left with a new notebook.

"I see more of a halo effect than cannibalization," said Brian Marshall of Gleacher & Co. yesterday.

In any case, Cook said competitors were the ones who should be worried about iPad sales, not Apple.

"If the iPad or tablets do cannibalize the PC market, keep in mind that we have low share of the PC market," Cook said, touting the Mac's low share as a benefit, not a disadvantage. "So the other guys lose a lot more, and we have a lot more to win."

And Apple isn't losing any sleep over potential cannibalization, Cook claimed.

"Honestly, cannibalization is not something that we are spending one minute on here," Cook said. "The iPad teams are building the best iPad for the future, and the Mac teams are building the best Mac, and I can tell you that both groups believe that they can continue to grow."

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Gregg Keizer

Computerworld (US)
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