Recent studies on iPad mini and Windows 8 are both bullish for Apple

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.

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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There are 30 comments. Add yours.

Chris Umiastowski says:

Good math :) If you're suggesting the survey is flawed, I would then tell you to consider the possibility that people were allowed to select more than one device in the list of what they were planning to buy.

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NickA says:

I'd say the survey was more than flawed. Whenever you need to preface something with "...was worded in such a way", it smells of inaccuracies. My survey could say: do you plan on buying a computer with Windows 8 (or a load of bread) in the next month? Hmm, wonder what the results would be. I'd say the numbers would be slightly skewed towards Microsoft.

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cardfan says:

No matter how you slice it, both studies bode well for Apple. Apple has to love that MS is shooting itself in the foot. Here Apple, take our customers. Windows 8 is a disaster. pretty much nails it.

crystal_planet says:

Absolutely correct my man. I'm so mad with Windows 8, I'm going to march right out and buy a 2000.00 Apple laptop with that whopping 13" display. Glorious.

Siggehandf says:

Everyone should have a mini! It's the best thing since sliced bread!

kch50428 says:

What was the best thing before sliced bread? :)

SockRolid says:

Re: "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."

That says it all, from Apple's perspective. Dominance in post-PC device OS and hardware design + infrastructure + services + supply chain + mindshare. Boom.

On the other hand, Microsoft is being forced to retreat to its legacy desktop OS + productivity suites. Because they have completely and utterly failed in smartphones and other post-PC devices. (And as Chris mentioned, Windows' consumer market share can and will erode as consumers are repelled by Windows 8.)

I wonder how much longer Ballmer will survive. The board might give him until, say, 6 to 9 months after the Windows 8 (desktop) and Surface Pro rollouts. If Windows 8 fails to put the "wow" back in computing and if Surface RT and Pro fail to sell well, I can't see why the board would want to keep Ballmer.

On the other hand, who's left to take over for Ballmer? Sinofsky was the best internal candidate. So who else would want to take over as CEO of Microsoft? Scott Forstall? And if an outsider takes over, will s/he be able to change Microsoft's entire corporate culture of "do nothing unless it helps us maintain our monopoly position (or unless we need to fool the board into thinking we're making progress in the post-PC world)"? I doubt it.

Shameer Mulji says:

As lunatic as it sounds, Scott Forstall is probably the only I can think of, other than J. Allard, who has the talent to pull it off.

SockRolid says:

Agree. Forstall was gunning for CEO at Apple. But his "abrasive" personality might not be a good fit at Microsoft. Unless he brings his cronies over from Apple to replace executives at Microsoft.

crystal_planet says:

Oh yes. Hopefully he brings his skeumorphic icons with him. That will set the world on edge.

okli says:

RT is DOA... and W8 is confusing disaster... I said before... and I'll say it again .. the only place for this huge 5 Pounds dancing gorilla is the Redmond's ZOO !!! ;-)

Shameer Mulji says:

I read a post on Paul Thurrott's Supersite For Windows blog today;

Windows 8 sales, so far, are well below projections. It's an interesting read.

cardfan says:

Thurrott laid it all out there. And the punch line? It was all avoidable. A blind man could've seen this coming. The only thing I might disagree with is making Vista out to be somehow worse. Vista was nothing compared to this.

SockRolid says:

Wow. My opinion of Thurrott has changed over the past year or so. He showed signs of being a mindless Wintel shill, saying that the Lenovo U1 hybrid laptop-tablet would kill iPad. Before iPad was even announced.

Now he's calling a spade a spade, at least in terms of pointing out Microsoft's deeply rooted problems in mobile (and soon in legacy desktop OS-land.) Then again, that could all be to make himself look more mainstream and less like a Wintel fanboy. Kind of like how Gruber blogs lukewarm praise of Surface.

Praising surface is risk-free because it makes Gruber seem more mainstream, which might increase his readership. Yet no matter what he writes, Surface seems destined to fail without threatening Apple in any way. Similarly, Thurrott calling out Microsoft's past, present, and impending failures makes might increase his readership. There's something for everyone on his site, even for Microsoft haters.

Shameer Mulji says:

"Then again, that could all be to make himself look more mainstream and less like a Wintel fanboy. Kind of like how Gruber blogs lukewarm praise of Surface."

I totally agree with this.

Mayson Lancaster says:

The AllThingsD link is borked.

ben korbel10 says:

what is really this for?????

frozencloud says: secure the readers' beliefs that Apple have nothing to worry against Microsoft.

awil26 says:

I wasn't part of the survey but this definitely describes me. Especially since I got windows 8 free since it was offered to students of my MIS class. I wanted to try out windows 8 but it's been sitting in a folder on my computer for almost a month now. It's definitely a tablet OS and even if you have a touch enabled computer, who wants to deal with that arm fatigue? It's much easier to type this with my iPad laying down on my lap than to reach up and touch the monitor on my desktop constantly. And my next computer will definitely be an iMac.


i did'nt read the survey put it seem all good about the finical figures for pie sales :D


DM52 says:

68% of people looking to purchase a new "computer" are going to get one with a Microsoft operating systems. How exactly is this bad for Microsoft? No company has a 100% retention rate, and Microsoft has had one of the highest ones for quite some time.

Beyond this, the survey does look to be flawed (working link:, as it was taken by a specific antivirus company, and sent to 1.6 million users, with 300000 responses. Bias is inherent in this, as people who are likely to switch, or disappointed with their current situation are more likely to respond, skewing the figures a specific way - in the same way that people don't leave good feedback at shops without prompting, but will readily complain. The nature of the free antivirus company, too, creates a potential bias, although this is less clear. The entire article has erroneous information about Windows 8, which hurts it's credibility even further.

Above, you called out a comment for noting the addition, and your response was along the lines of "people can select more than one answer". If this is the case, there will no doubt be overlap iPad and Apple computer products, and thus your 42% is wrong. You can't have it both ways. I'd also imagine there are at least some that responded in an "undecided" manner, reducing the total further.

"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."
Not a chance they'll outsell desktops and notebooks combined. At least, not for a significant period of time - and, to be clear, if this happens, I don't think the iPad will be the market leader anymore. Tablets are useless for productivity. My iPad is great for wasting time on the internet, but I'm not typing a document on it, because it's too frustrating.

As for cannibalization, that really depends on the definition used. The article (working link: presents results in an unclear, but I'll try to work with it. We're saying 12% of those surveyed were looking to buy an iPad mini - what the survey has not measured is how many of these would have purchased the higher margin iPad, had the mini not launched - this is, as far as I'm concerned, cannibalization - and I'd imagine that number is quite high. I also note that 42% claim to be "replacing" a Windows PC. This suggests that they haven't really looked into it yet, because the devices are certainly not of the same nature, and the productivity issues I mentioned above will heavily come into play.

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