RBC Capital Markets estimates that tablets may ultimately cannibalize around 15 percent of the total PC market through 2014, which while material, doesn't deter the PC markets from seeing sustained growth over the next 5-years.
Our underlying assumption is tablets, in their current form and price points, are unlikely to represent anything more than a companion device in Enterprise segment. On the consumer side we believe the material price gap between tablets and low-end notebooks/netbooks may impede cannibalization above the 15% estimate, said Amit Daryanani, an analyst at RBC Capital.
Daryanani said his 15 percent cannibalization assumption is based on tablet pricing remaining about $500 for entry level tablets and pricing trending down inline with PC markets over the next five years.
Under than pricing dynamic, Daryanani expects that the mid/low-end notebook market ($500-$700 market) is what is at risk. Daryanani doesn't see a netbook buyer willing to step up and pay more than $500 for a tablet. Nor does Daryanani believes tablets are at a point, where they are more than a notebook companion product, particularly in the Enterprise segment.
We expect the PC market to revert to slower and more normal growth rates in 2011. Our expectation is 13 percent year-over-year shipment growth and 6% revenue growth. While some characterize this as a slowdown, we prefer to frame the issue as a reversion to the mean. Where PC growth should be the strongest is in the emerging markets, said Daryanani.
Notably, Daryanani is modeling the U.S. falling to second place behind China when looking at shipments for the full year 2011. PC deceleration coupled tablet cannibalization will result in headwinds for Dell Inc., Seagate and Hewlett-Packard (HP) from a revenue perspective.
From a consumer perspective, Daryanani could see a material spike in unit sell through if tablet ASP’s could come down into the netbook pricing range of $200-$300. From an enterprise adoption perspective, Daryanani believes a more robust security feature, MS Office support, integration/support of tracking mouse, more compute power.
RBC Dominion Securities Inc.’s smartphone analyst, Mike Abramsky, in his report today noted that he expects tablets to sell 50 million units in 2011 and reaching 185 million units in 2014, essentially implying about 15 percent PC cannibalization.
Abramsky's numbers are below consensus expectations that call for over 55 million tablets in 2011 and over 30 percent cannibalization of PCs through the next 5-years. We expect Apple Inc.'s iPad to remain the clear leader in the tablet arena despite what is becoming a fairly crowded market place, said Daryanani.
Daryanani said his tablet analyst expects global tablet shipments to rise from 17 million units in calendar 2010 to 185 million in calendar 2014, an 83 percent CAGR (Compound Annual Growth Rate). Global tablet revenue is expected to rise from $11 billion in calendar 2010 to nearly $70 billion in calendar 2014.
Daryanani said the rapid rise in tablet shipments is driven by the higher affordability of tablets, consumers’ re-allocation of spending to tablets from discrete consumer electronics (e.g. GPS devices, MP3 players, etc.), increasing mobility of consumer/business computing , and (nominal near term, larger longer term) , some replacement of traditional PCs with tablets.