Are Tablets Really Killing Netbooks?

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iPad vs. laptops
For months we've been hearing that tablet computers--led by Apple's iPad--are hurting netbook sales in a big way. But are they really? It depends on whom you ask. For now, touchscreen tablets do appear to be luring consumers away from netbooks. In the long term, however, netbooks will likely hold their own in an increasingly fragmented mobile device market, particularly as computer makers address user complaints by enhancing netbooks with faster processors and new capabilities.

Dueling Data

Tech industry analysts can't seem to agree on whether tablets are harming netbook sales. Changewave Research in October surveyed more than 3100 consumers and found that only 14 percent of those who planned to purchase a laptop within 90 days would get a netbook--a significant drop from 18 percent at the start of 2010, and 24 percent in June 2009.

But ABI Research says the netbook market will not be "gravely injured" by the iPad and similar tablets, including the Samsung Galaxy Tab and Research In Motion's BlackBerry PlayBook. "This is a rumor perpetuated by Apple fanatics," wrote ABI Research mobile device analyst Jeff Orr in an e-mail to PCWorld.

Orr points out that annual netbook shipments continue to grow, and that the top isn't in sight. Specifically, about 36 million netbooks shipped worldwide in 2009, and an estimated 43 million will ship in 2010. The netbook is the first ultramobile device to reach "mass-market appeal," which Orr defines as a product that ships 40 to 50 million units annually. He acknowledges, however, that netbook sales are slowing, and says that today's shipments don't match the "meteoric growth" of the past two years.

Blame the iPad?

Netbook shipments in the United States fell 34 percent from the third quarter of 2009 to the same period in 2010, according to research firm Gartner. The likely culprit? A certain tablet from Apple comes to mind.

"Yes, there was some displacement of mini-notebooks by the iPad in the U.S., but determining how much is not an exact science," wrote Gartner client computing research director Angela McIntyre via e-mail. She estimates that Apple's bestselling tablet "displaced" 10 to 20 percent of netbook shipments in the United States in the third quarter of 2010, which suggests that a sizable number of consumers chose the iPad over a netbook.

Consumers appear not to be as enamored of netbooks as they once were. But tablets aren't the sole cause.

In fact, netbooks weren't the only computer devices to suffer from sluggish back-to-school sales in the third quarter of 2010. "Many factors contribute to this, such as the down economy, few new compelling PCs on the market, and a wait-and-see attitude about new PCs and media tablets coming to market next year," wrote McIntyre.

Twice the Price

"We are seeing a slowdown--a pretty dramatic slowdown--in the netbook market. And a reasonable amount of that is from the iPad," says IDC computer analyst Bob O'Donnell. Netbooks and touchscreen tablets are both secondary computing devices, and the consumer's dilemma is deciding which gadget to buy.

However, the disparity in netbook and tablet prices makes the iPad-is-killing-the-netbook argument "a little hard to swallow," says O'Donnell. For instance, the average selling price for netbooks is under $300, according to IDC. But for the iPad it's $630--more than twice as much.

"Right there's a big disconnect between [average selling prices]. That's why it's hard to say that there's a direct, one-for-one knocking off, because of that huge price gap," adds O'Donnell, who sees a correlation between today's tablet-versus-netbook battle and the netbook-versus-laptop debate of 2008.

"This is sort of a netbook redux. Two years ago, netbooks were going to cannibalize notebooks," he says. "There was a period when a whole bunch of people bought netbooks, and it somewhat skewed the view of the notebook market. But at the end of the day, when people needed to upgrade a notebook, they did."

Even if the iPad-induced sales hit proves to be temporary, the bigger issue is how netbooks will rise to meet the tablet challenge. "Nobody is saying that a netbook or a tablet is a must-have, primary device. That's where desktops and laptops fall," says Cindy Ng of Intel's netbook marketing team. "It's a similar market because they're both companion devices and nice to have. But at the same time, I think there are different types of consumers who value different usages."

Netbook users, for instance, really want a physical keyboard. "For doing Twitter feeds and social networking updates on Facebook, clearly the netbook with a physical keyboard really enables that ease of use much more than a tablet would with a virtual keyboard," says Ng. And for frantic classroom note-taking, a netbook usually tops a tablet.

Next page: Netbooks, Phase II

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