iPad Mini cannibalisation may add just 3 million to Apple's tablet sales: analyst

Apple better get used to it: IDC predicts 60 per cent of 2013's tablet sales will be mini models

An aggressive iPad Mini cannibalization rate could add as few as 3 million tablets to Apple's bottom line in what is shaping up to be a record total for the quarter, an analyst said today.

Cannibalization -- as opposed to replacement -- describes sales that come at the expense of another device, usually in the same company's line-up.

"Cannibalization occurs when a potential iPad buyer is swayed towards the iPad Mini -- because of the lower price or any other factor," said Sameer Singh of Tech-Thoughts in an email today. "So if the iPad Mini did not exist, those buyers would have bought the larger iPad."

According to Singh, the iPad Mini will cannibalize sales of the standard 9.7-in. iPad to the tune of around 50%. In other words, 50% of the buyers of the iPad Mini would have, failing the availability of the smaller 7.9-in. tablet, bought a full-sized Apple tablet instead.

The lower the iPad Mini's cannibalization rate, the more incremental sales -- again as opposed to replacement sales -- Apple adds to its books.

Singh's cannibalization rate is significantly higher than most other experts', who have settled at a rate of between 10% and 20%.

Minus a Mini -- in a counterfactual world where former CEO Steve Jobs' famous dismissal of 7-in. tablets held sway -- Apple would sell an estimated 22.7 million iPads in 2012's fourth quarter, Singh calculated. He laid out his methodology in a Tuesday blog post.

But with 6 million to 7 million iPad Mini sales this quarter -- Singh's bet based on production reports as well as the well-known supply issues Apple's facing with Mini displays -- and a 50% cannibalization rate, the Mini will add only 3 million to 3.5 million iPads to Apple's quarterly sales figures, for a total of 25.7 million to 26.2 million of all tablets.

A lower cannibalization rate -- in the 10% to 20% range -- would boost total iPad sales for the quarter to between 27.5 million and 29 million, said Singh in his email today. Those numbers represent incremental iPad Mini sales of 5 million to 6 million units.

But no matter what the iPad Mini's cannibalization rate, it's almost certain that Apple will sell a record number of tablets this quarter. The current record of 17 million iPads was set in the quarter that ended June 30, 2012.

Customers don't care about cannibalization, but Apple will: By selling more iPad Minis at lower prices than full-fledged iPads, Apple may be gaining users -- 3 million to 3.5 million by Singh's estimate -- but it's losing revenue. Buyers of the iPad Mini, sans the tablet, would have instead purchased a higher-priced iPad, which generates more revenue for Apple.

But Apple could laugh all the way to the bank, according to IHS iSuppli, which last month said the profit margin for the iPad Mini was higher than that of the larger iPad.

And cannibalization, for better or worse, is something that Apple will have to learn to live with, if predictions by research firm IDC is on the money. Among its just-released 2013 predictions, IDC prophesied that up to 60% of the tablet market next year will be composed of devices with screens 8-in. or smaller.

"[That's] a remarkable leap from just 33% in 2012," IDC noted. "Of course, the launch of Apple's iPad Mini will drive much of this demand, but expect intensifying competition from Amazon's refreshed Kindle line-up, the surging Google Nexus 7, and Barnes & Noble's refreshed Nook offerings."

Singh agreed. "I expect lower price points to drive adoption going forward, and that gives smaller tablets the advantage," he said Tuesday. "I think the iPad Mini has the potential to be the most popular iPad model, once Apple manages to fix their supply issues."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

Read more about tablets in Computerworld's Tablets Topic Center.

Tags AppleGoogleMacintoshhardware systemstablets

More about Amazon Web ServicesAppleApple.GoogleIDC AustraliaMicrosoftNobleTopic

Comments

Comments are now closed

Why is Microsoft updating Windows PCs for a security bug on the server?

READ THIS ARTICLE
DO NOT SHOW THIS BOX AGAIN [ x ]