cannibalization
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Morgan Stanley: iPad mini cannibalization "overblown"
A survey of over 1,000 U.S. consumers was published today by Morgan Stanley and AlphaWise, showing that although sales of the iPad mini are cannibalizing sales of some of the full-size iPads, concerns over the trend are "overblown." That was the opinion of Morgan Stanley analyst Katy Huberty, who said that the numbers show that Apple's risk over cannibalization by the mini is "manageable." The numbers she's referring to indicate that 47 percent of iPad mini purchasers are new to Apple, which is slightly less than the 56 percent number for the full-size iPad. There were other positive signs for Apple; the survey showed that about the same percentage of potential buyers -- 50 percent -- plan on purchasing an iPad over other tablets as they did in December 2011. The news isn't as rosy for Amazon's Kindle Fire, which saw a 5 percent drop in respondents planning a purchase. Microsoft's new Surface tablet is apparently interesting to 12 percent of the respondents, while Samsung's tablets showed a 7 percent rise in purchase intentions over December 2011. Google's Nexus tablet also showed a solid rise of 6 percent, while all other tablets saw a huge drop in interest from 24 percent last year to only 5 percent in 2012.
Does it matter if the iPad mini cannibalizes iPad sales?
On October 23rd, Apple introduced its fourth-generation iPad, the iPad mini and a slew of Mac refreshes. Somewhat lost in the reaction to those launches and refreshes was what I think is the most interesting story of all: the iPad 2, and how competitive it has been in this market. Today, a bit of the iPad 2 story is hitting the news as analysts discuss whether the iPad 2 and the iPad mini are cannibalizing iPad sales. I think there's a bigger discussion to be had that goes beyond basic cannibalization. I hope you'll have patience with me as I try to draw together a number of different strands. The iPad 2 is an amazing device. It is, in many ways, the little tablet that could. It offers a complete tablet experience at a very affordable price. In discussing the iPad mini price point, Phil Schiller stated, "The most affordable product we've made so far was $399 and people were choosing that over those devices." [emphasis mine] Consumers were saying that they wanted Apple, that they wanted iPad and that they were willing to forego premium features like the Retina display, upgraded cameras, LTE connectivity and better processors to purchase that experience. It's often taken for granted that Apple doesn't cater to value buyers, but I think that it does. From the Mac mini to the iPod shuffle, Apple has had a place for frugal buyers -- offering great value at lower price points. If you're thinking about comparing specs, as Amazon did quite pointedly, you're missing the mark. Yes, I could buy "more computer" for the same price I just spent on my new Mac mini, but buying Apple is about not compromising the quality of your computing experience. Hardware specs are just that: bloodless specifications that say precious little about your actual day-to-day experience. There's a reason Apple keeps earning those "satisfied consumer" awards. Buying Apple is about retaining customers for life -- not someone who buys Asus one year and Kleeborp the next. With Apple, you hook consumers on the experience, the ecosystem and the consistency. That's why I think positioning another member of the tablet family around/below the current iPad 2 price point is much smarter than people are giving Apple credit for. In a tough economy, Apple is filling all the seats in its stadium, not just the ones near the field. Metaphorically speaking, it's about how much each seat costs. Concert tickets are typically offered at many price points. And yet stadiums still sell out. The notion that someone will merely buy an iPad 2 or iPad mini once, then never buy an Apple product again, denies about 30 years of buying pattern data and the Apple halo effect. While analysists discuss exactly how much the mini is going to cannibalize premium iPad sales, Apple can take a longer view. Bringing customers into the Apple ecosystem, regardless of which level they arrive on, helps lock them into long-term profits that derive from secondary services like App Store, iTunes and iCloud -- not to mention future hardware sales. Apple is making money on each iPad sale, while Amazon loses money on each Kindle Fire HD. Plus, the iPad doesn't feel like a commerce portal the way the Fire does. Consumers are buying a full tablet experience, not a front end to a mall. These are lifestyle purchases. An iPad 2 or iPad mini customer is making an investment in doing things, having fun and accomplishing tasks on their device, not just floating on an upward cycle of durable goods sales. In today's Washington Post, analyst Sameer Sing points out that documents sourced from the Apple/Samsung patent case indicate that "iPad 2 cannibalized approximately 60 percent of third-generation iPad sales, i.e. for every 5 million iPad 2 buyers, Apple lost 3 million third-generation." This cannibalization would presumably extend from the iPad 2 to the iPad mini over time. Do the mini and the iPad 2 primarly cannibalize sales or create them? Perhaps there's a third option: instead, they could be building a new class of Apple customer. In a depressed economy, many consumers aren't looking to buy premium. The iPad mini and the iPad 2 offer an attractive lifestyle-purchase option compared to the Kindle Fire and the Nexus 7. As Steve Jobs once said, you make good stuff and people will buy it. The mini and the iPad 2 bring that good stuff within the purchasing radius of many more potential customers.
CE-Oh no he didn't!: Tim Cook savoring the iPad's Windows 'cannibalization'
Tim Cook had plenty of reason to celebrate during today's Apple earnings call -- and really, who can blame the guy if a bit of that celebration spilled over into some old school executive gloating? While talking up the company's impressive iPad numbers -- and the inevitable PC-eclipsing nature of the space, Cook let this bomb drop, There is cannibalization of the Mac by the iPad, but we think there's more cannibalization of Windows PCs by the iPad - we love that trend.Yep, the iPad may be eating away at the company's computer business like the iPhone did to the iPod before it, but that's fine, since the tablet looks to be eroding Windows PCs even more so.
Apple posts record Mac quarter despite some iPad cannibalization
Along with the iPad, Mac sales were one of the highlights of Apple's quarterly earnings report. In the quarter that just ended, Apple sold 4.89 million Macs, a 26 percent increase over the year-ago quarter. Apple CEO Tim Cook was pleased about the Mac performance, but in response to an analyst question he did confirm that some customers are buying the iPad instead of the Mac. It's inexpensive and easy to use, two features that appeal to the average consumer. But Apple's computers are not as hard-hit by iPad cannibalization as the PC market. Cook suggested today, as he has in the past, that a far larger number of people are choosing to buy an iPad instead of a Windows PC (versus those choosing the iPad over a Mac notebook). Cook sees this as a growing trend and he said today he believes that the tablet market will someday eclipse the PC market. Considering that Apple currently has 3/4ths of all tablet sales, that's good news for the company's prospects.
