Recent studies on iPad mini and Windows 8 are both bullish for Apple
Now that the iPad mini has been available for a while, we’re starting to see some interesting industry research headlines pop up, based on consumer surveys. Earlier this week, Cowen and Co. made headlines with one particular study that I wanted to bring up for discussion.
Cowen's study, which is outlined in detail over at AllThingsD, involves 1,225 US adults who were surveyed on buying intentions. 12 percent plan to buy an iPad mini in the next 18 months.
What's more, over half of the people planning to buy an iPad mini said it would be their first tablet. Only 16.6% said they intended to use the iPad mini to replace another device, and among that small crowd, only 29% said they’d be replacing an iPad (My guess: likely many of them are original iPads).
Do the math. Of those planning to buy an iPad Mini, only 5% claim to be replacing an iPad. So the vast majority, and I do mean vast, are buying an iPad mini either as their first ever tablet, to replace another brand of tablet, or as could be the case in many families, to grow their tablet collection.
This hardly looks like a case of self-cannibalization to me. Even if it were, I still think it would be the right move for Apple. Better to cannibalize your own product than have someone else do it. But in this case, Apple seems set to grow tablet sales significantly without giving up too many of its full-size iPad customers.
I read this study as a very bullish indicator for Apple. Remember that Wall Street generally freaks out on gross margin declines. If Apple trades one iPad customer for an iPad Mini buyer, which generates less margin, profitability declines. I’ve argued strongly that overall growth in unit volume will more than offset the losses, meaning that profitability will go up despite margin going down. Wall Street focuses on the headline news of lower margins, and the stock tanks. That’s part of the reason Apple stock has declined recently.
But it looks like we’re hardly seeing any cannibalization. So instead of Apple having to trade one product sale for another, they’re keeping most of their full size iPad sales and stacking iPad mini profits on top. This is excellent news. Yes, margins will still drop. That’s what happens when product mix shifts with a lower cost product. But profits will grow, which is what investors ultimately care about.
Another study also made headlines today. Not so much about the iPad mini specifically, but Windows 7 customers being hesitant to adopt Windows 8. You can read about this study, by anti-virus maker Avast, in USA Today. It seems that 16% of US Windows users plan to buy a new computer shortly. The survey was worded in such a way that an iPad counts as a computer. So check out the results: 68% plan to buy a Windows 8 device. 30% plan to buy an iPad and 12% plan to buy a Mac.
That’s 42%, a pretty big chunk of the US market, who plans to buy Apple products. This doesn’t bode well for Microsoft.
Together, these two studies are very bullish for Apple. The tablet market is still early into its growth phase, and iOS is sitting pretty to capture many multiples of market share compared to what Apple accomplished with MacOS over the last decade.
Tablets will eventually outsell desktops and notebooks combined. They’ll be used in all sorts of markets. They’ll get Apple to the next level of profitability.
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