iPad Cannibalization of Mac Sales

  • Posted: 24 January 2011 02:22 AM

    This issue was addressed during Tuesday’s conference call with analysts. I’ll be looking for clues over the next few quarters. But something that struck me during my first analysis of the FQ1 revenue results is that all other product segments (other than the Apple iPad) maintained the same combined 40%+ revenue growth in FQ1 that was realized in FY2010.

    This suggests preliminarily that cannibalization of other Apple product sales is quite limited, if it’s occurring at all. Mac unit sales growth in FQ1 was about 23% versus the 31% pace of growth realized in FY2010. However, domestic and global PC sales growth may have slowed as well.

    I’m currently looking closely at the trends in Mac unit sales. In the December quarter Mac ASPs rose sequentially from $1,254 to $1,313, reversing a downward trend. If there is some cannibalization of Mac sales it’s most likely at the low-end of the Mac market.

    Again, there isn’t sufficient data to draw any conclusions and I’ll be watching for clues over the next few quarters. But overall, the iPad appears to be having little to no effect on overall revenue growth when all other revenue sources are combined.

         
  • Posted: 24 January 2011 02:44 AM #1

    DT, I have been chewing on this for five days, and will continue to do so.  So this post is preliminary.

    I was mildly disappointed at the Mac unit numbers.  Desktops is where the hit was taken.  Laptop growth was fine, meeting or exceeding my optimistic expectations.  But unit sales of desktops actually declined 1% y/y.

    It is way too soon to conclude that the iMac is going to flatten or decline.  But it might be the case.  If so, the next question then becomes, will Apple have another desktop to pick it up?  Something new. 

    My thoughts are swirling.

         
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    Posted: 24 January 2011 12:52 PM #2

    Anecdotally,

    In 3 friend’s families, the iPad won or has the strong edge.  For me, a desktop was the priority.  Later, the iPad will be added.

    yes, there is cannibalization.  But I call it, “early stage halo effect.”  Those iPad sales will help Mac sales, just as Mac people strongly embraced the iPod, the iPhone and the iPad.

         
  • Posted: 24 January 2011 01:24 PM #3

    I wonder how Ford sees the cannibalization of F250 sales by F150 sales?

         
  • Posted: 24 January 2011 01:44 PM #4

    I know for myself, when our MacBook finally croaks it will probably be replaced with an iPad. That’s a year down the road I think.  I think once the iPad is properly connected to iLife (iPad views iLife content from desktop or server), I think it could start to eat into laptop sales.
    I would say that the iMac’s have gotten so good lately that I think they will seriously eat into MacPro sales. MacPros I think will become more and more the device for audio/video editing and heavy science work. iMacs can handle any kind of print and web work now. If you don’t have a huge investment in monitors, the iMac is a great choice for designers.

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    Posted: 24 January 2011 01:47 PM #5

    I too was mildly disappointed at total Mac sales in the quarter and I was surprised that the ASPs went up given the introduction of lower priced MBAs. The number of people I know that bought MBAs in the quarter (myself included) was so high that I expected a bigger number for total Macs. So I do believe that there was a slight cannibalization from iPads. Nothing that raises any concern for me though. The Halo effect is strong and working in Apple’s favor everyday.

         
  • Posted: 24 January 2011 01:57 PM #6

    danthemason - 24 January 2011 05:24 PM

    I wonder how Ford sees the cannibalization of F250 sales by F150 sales?

    That was similar to the conversation with analysts on Tuesday. Some cannibalization is to be expected, but revenue continues to rise at a frenetic pace.

    The rise in ASPs sequentially portends good news for continuing Mac revenue growth. In the smartphone and tablet era, there’s no need for second or third PCs in most homes.

    The domestic PC market has reached a mature phase and sustaining Mac unit sales growth at 20%+ is impressive considering the move away from the PC-centric model.

         
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    Posted: 24 January 2011 02:05 PM #7

    Later this year we’ll get an iPad. My guess is that it will effectively replace my wife’s 3 year old white MacBook for day to day use. With the exception for our accounting stuff the iPad should do all the surfing and e-mail and such she needs.

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  • Posted: 24 January 2011 03:52 PM #8

    geoduck - 24 January 2011 06:05 PM

    Later this year we’ll get an iPad. My guess is that it will effectively replace my wife’s 3 year old white MacBook for day to day use. With the exception for our accounting stuff the iPad should do all the surfing and e-mail and such she needs.

    The Apple iPad is very much a product that fits that need much more than a laptop or netbook. It’s why iPad sales will continue to rise but determining the level of cannibalization, if any, will be the challenge.

         
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    Posted: 24 January 2011 04:46 PM #9

    DawnTreader - 24 January 2011 07:52 PM
    geoduck - 24 January 2011 06:05 PM

    Later this year we’ll get an iPad. My guess is that it will effectively replace my wife’s 3 year old white MacBook for day to day use. With the exception for our accounting stuff the iPad should do all the surfing and e-mail and such she needs.

    The Apple iPad is very much a product that fits that need much more than a laptop or netbook. It’s why iPad sales will continue to rise but determining the level of cannibalization, if any, will be the challenge.

    By the time we figure it out, Apple will be the largest PC manufacturer in the world.  The definition of PC is changing who really cares wether it’s laptop, tablet, pocket.  The divisions are artificial and across the spectrum of computing needs, no single device is perfect for all use cases.  As we move to advanced mobile broadband like LTE, all the traffic moves as data packets, so suddenly voice becomes another packet and voice service will be available to any device With data access, wifi for fixed and LTE for mobile.  Suddenly everyone will realize that the iPad and iPod Touch with FaceTime 2 are just as capable using VOIP and Apple’s networks as any smartphone.

         
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    Posted: 24 January 2011 06:17 PM #10

    Do Sedans cannibalize Trucks, SUVs, Crossovers and Station Wagons?

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    Posted: 24 January 2011 07:36 PM #11

    Tim Cook said it best:  “if this is cannibalization, it feels pretty good.”  Dry humor at its best!

    I’m not sure what to think yet of the decline in desktop sales.  Did iMac and Mac mini prop up the Mac Pro?  Did all three not do as well?  We need more data points with iPad until we can see a bigger picture.  For now, 20%+ YOY Mac growth is fantastic when you look at the PC market as a whole, and laptops are still leading the charge.  I guess I’ll be a card-carrying laptop…carrier this year myself, when the new MacBooks come out.  Might as well take my AAPL dividend, get some work done (a laptop will serve my mobile computing needs better than an iPad), and help the company’s quarterly results at the same time.  LOL

    [ Edited: 24 January 2011 08:06 PM by Mav ]

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  • Posted: 25 January 2011 02:01 AM #12

    pats - 24 January 2011 08:46 PM

    By the time we figure it out, Apple will be the largest PC manufacturer in the world.  The definition of PC is changing who really cares wether it’s laptop, tablet, pocket.  The divisions are artificial and across the spectrum of computing needs, no single device is perfect for all use cases.  As we move to advanced mobile broadband like LTE, all the traffic moves as data packets, so suddenly voice becomes another packet and voice service will be available to any device With data access, wifi for fixed and LTE for mobile.  Suddenly everyone will realize that the iPad and iPod Touch with FaceTime 2 are just as capable using VOIP and Apple’s networks as any smartphone.

    Here’s the issue: Apple has commoditized software in favor of hardware margins. The iPad’s impact is far greater than the number of units sold. The company is changing the economic playing field for developers. The high margin PC market is now owned by Apple and developers are flocking to the iOS environment because the incremental cost of apps is minimal for consumers and Apple is delivering an app hungry user base. There’s little left of the $1,000+ PC market outside of Apple which will have a big impact on the high-priced software market. Apple is cutting the underpinnings of the PC market’s economics, leaving little but the company’s own platforms for growth.

         
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    Posted: 25 January 2011 02:17 AM #13

    I think the drop in desktops is mostly due to people upgrading from the mac mini to the more expensive MacBook or MacBook air.

    If that is indeed the case, then that’s a big net positive for apple.

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  • Posted: 25 January 2011 06:27 AM #14

    Mav - 24 January 2011 11:36 PM

    Tim Cook said it best:  “if this is cannibalization, it feels pretty good.”  Dry humor at its best!

    I’m not sure what to think yet of the decline in desktop sales.  Did iMac and Mac mini prop up the Mac Pro?  Did all three not do as well?  We need more data points with iPad until we can see a bigger picture.  For now, 20%+ YOY Mac growth is fantastic when you look at the PC market as a whole, and laptops are still leading the charge.  I guess I’ll be a card-carrying laptop…carrier this year myself, when the new MacBooks come out.  Might as well take my AAPL dividend, get some work done (a laptop will serve my mobile computing needs better than an iPad), and help the company’s quarterly results at the same time.  LOL

    Worthwhile speculation. No data to offer, but an observation. How we interact with computer tech is changing directionally such that less is in many ways more. As stated in reference to geoduck, for most casual users, the iPad can handle their day to day computer needs.

    We appear to be searching for that ideal balance between maximum capacity in the least essential mass. This may be why iPads are hurting PC (not just netbook) sales, and is not a process that began with the iPad, but with laptops (certainly in my field of work). I would argue that this is less about ‘cannibalisation’ than it is about evolution in form and function.

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  • Posted: 25 January 2011 09:11 AM #15

    ” What it does symbolize is just how prescient it was four years ago to drop ?Computer? from Apple Inc.”

    There was nothing prescient about it!