Analysts: Tablet Cannibalization Could Be Overblown

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While iPads and other tablets are indeed eating into sales of other PCs, the “cannibalization” might not be as extensive – or at least as uniform – as once thought, according to some observers.

Essentially, rather than relying on a tablet as their sole PC, consumers and business people investing in tablets are using the devices as second or third computers, analysts say.

Apple iPad 2In large part, that’s because tablets still pose certain limitations. “Tablets are not full PC replacements,” contended Avi Greengart, research director for consumer devices at Current Analysis, in an interview with TabletPCReview. Some industry reports show a continuing sales slide for notebook and desktop PCs. Yet Apple’s MacBooks and iMacs stand out as shining exceptions, noted Rob Enderle, principal analyst at the Enderle Group, during another interview.

Moreover, netbooks seem to be taking a much deeper dive than more fully capable notebook PCs. “Sales have peaked for netbooks,’ Greengart observed.

Screen sizes are about the same size across tablets and netbooks, pointed out Karl Volkman, CTO of SRV Network, Inc., a managed service provider (MSP) which outsources functions such as network administration and disaster recovery for small and medium-sized businesses (SMBs).

In the plus column, netbooks are able to run full-blown operating systems such as Windows 7. Also unlike tablets, netbooks come with hard keyboards. Netbooks, though, lack touchscreens. Netbook screens can be hard to read, and keyboards tend to be cramped. Meanwhile, for those who want them, wireless keyboards are available for tablets. “And right now, tablets are ‘hot,’” Volkman told me.

It could be, too, that after shelling out $600 or so for a new pad this year, some consumers will replace their existing notebook or desktop PCs in the next year or so. “That’ll be one of the big questions,” according to Enderle.

Origins of Cannibalization
The issue of tablet “cannibalization” first reared its head last fall, when Best Buy CEO Brian Dunn reportedly told the Wall Sreet Journal that internal company estimates had shown the iPad to be “cannibalizing sales from laptop PCs by as much as 50 percent.” Soon afterward, Fortune reported on a research note from Katy Huberty, an analyst at Morgan Stanley, which offered evidence that notebook retail sales growth in the US had not just slowed but actually reversed during August and early September of last year.

The article in Fortune, however, did not make it clear, whether Morgan Stanley’s “notebook” numbers also included netbooks.

What Tablets Can (And Can’t) Do
Tablets can be great tools for quickly accessing Facebook pages and for media playback and other entertainment apps, Greengart illustrated.

laptopBut there are certain use cases where a tablet still isn’t as good, such as video editing or writing a term paper. Could you do these things on a tablet? Yes, but you couldn’t do them as well. You could even do them on a smartphone, although that wouldn’t be a particularly good experience,” according to the analyst.

Concurred Enderle: “The tablet is a great consumption device, but it sucks as a creation device. It just doesn’t have the head room.”

Will Tablets Replace Business PCs?
Also according to Enderle, tablets aren’t about to replace desktop PCs in business settings any time soon. For instance, even among sales forces that are using tablets in the field, detailed order entry is still typically done back in the office on desktop computers.

“In the far future, the tablet might replace the desktop PC in businesses,” Volkman predicted. “But right now, tablets aren’t at the same speeds, and they can’t run most of the high-end business apps.”

Will Tablets Replace Laptops?
A recent study by Nielsen suggests that while tablets are dislodging consumer notebook PCs to some extent, the trend isn’t exactly universal. About 32 percent of tablet owners said they’re using their notebooks less often or never, while 35 percent said the same about their desktop PCs.

PlayBookConversely, though, the vast majority of tablet owners said they’re using their notebook and desktop PCs the same or more as they did before their tablet purchases.

Some segments of the laptop market might be faring better vs. tablets than others. Greengart mentioned today’s ultramobile PCs (UMPCs) – which are far less pricey than their predecessors of a few years back – as one example.

By and large, business travelers aren’t ditching their laptop PCs in favor of tablets, either, Volkman maintained, basing this and other assessments on what he sees among his business customers.

The one exception involves the relatively few business executives who only want to be able to access their email and browse the Web when they’re out on the road, Volkman said.

Ultimately, business apps designed for the BlackBerry OS which operates on RIM’s BlackBerry phones will be recompiled for QNX, a new operating environment that runs on RIM’s new PlayBook tablets. That hasn’t happened yet, though.

Will Consumers Buy PCs Next Year?
While consumers are spending money on tablets this year, will they pour their extra cash into new laptop or desktop models – or maybe HDTVs or washing machines – next year instead?

“Consumers do seem to be holding on to their existing PCs a little longer now. They’re all excited about buying a tablet, because it’s the ‘new thing’,” Enderle said.

Research shows, however, that consumer ‘spend’ has stayed rather flat over the past few years, according to the analyst. “Nobody is in agreement over exactly where this ‘spend’ is going,” he acknowledged. Yet particularly in a current tight economy, he added, consumers tend to be very “tactical” in their spending, carefully weighing their big purchases for each and every year.

If consumers do replace their current notebook or desktop PCs, it could be the tablet, HDTV, washing machine, refrigerator, or even the automotive industry that takes a major hit next year, he theorized.

Already, the flat panel TV industry is in an ‘oversupply situation,” and 3D TVs aren’t taking off as vendors had hoped, Enderle told me.

As tablets gain more capabilities in years ahead, though, they’ll be much more likely to take over the roles of larger PCs, experts suggest. After all, a lot of folks really don’t really want to own three PCs simultaneously — or to lug two of them around.



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