Apple's (Nasdaq: AAPL) iPad is likely to eat into the sales of PCs, especially low-end notebooks, and it might even outgrow the PC market, even at premium prices.

With iPads performing many functions of a PC, users could delay the purchase of new laptops or simply upgrade their existing PCs.

A recent survey by Alphawise, Morgan Stanley's internal research team, and investment bank Piper Jaffray, showed that almost 44 percent of iPad owners said they would not be buying a notebook.

The iPad is a tablet computer marketed as a platform for audio and visual media such as books, periodicals, movies, music, and games, as well as web content. Apple released the iPad in April 2010 and sold 3 million of the devices in 80 days.

"Sales of traditional notebooks appear to be feeling pressure from the iPad, causing a scramble by vendors to launch iPad-like tablets," UBS Investment Research analyst Maynard Um wrote in a note.http:/img.ibtimes.com/www/site/us/images/1px.gif

Um believes that a majority of this impact is occurring on the lower end of PC sales as the iPad is priced close enough to this range that it becomes attractive to consumers looking to make purchases within this segment. iPad starts as low as at $499 for a 16GB version with Wi-Fi.

Seeing the soaring popularity of the iPad, many PC makers, from Dell (Nasdaq: DELL) to Hewlett-Packard (NYSE: HPQ), are launching iPad-like tablets. Samsung is preparing to launch its 7-inch Galaxy Tab, while Dell has already released its 5-inch Streak. HP is working on its Slate tablet with Windows 7. Research In Motion is reportedly exploring a BlackBerry-branded tablet, and Microsoft (Nasdaq: MSFT) intends to port Windows 7 onto a variety of tablet form-factors.

Um said Apple could sell 28 million iPads in 2011, perhaps delaying customer purchases of traditional notebooks, while Barclays Capital analyst Ben Reitzes estimates that Apple would sell 20 million iPads in 2011.

Reitz, who has an "overweight" rating and $340 price target on Apple stock, noted that one million incremental iPad sales would add about 20 cents to Apple's earnings, assuming a sales price of $650 and a 30 percent margin.

iPad users also have another reason to cheer, as new iPads with cameras are expected at Apple's event in the first quarter of 2011.

Considering the cannibalization of iPad in to PC sales, several analysts have cut their PC forecasts for the 2010 calendar year.

Reitzes cut his PC unit growth estimate for calendar year 2010 to 16 percent from 19 percent. On the other hand, the analyst raised his tablet forecast for calendar year 2010 to 15.85 million units from 15.2 million units.

"While back to school got off to a late start, we believe signs are clear that consumer PC demand is trailing off as the economy falters and consumer PC comps get tougher. We also note that the iPad is gaining even more steam right now as Apple has successfully moved through production issues -- so cannibalization could pick up even more into CY-end," Reitzes said in a note to clients.

"Given the current demand situation and more favourable component pricing, we wouldn't be surprised to see modestly more aggressive consumer PC pricing emerge by CY-end," the analyst said.

Analysts also say that iPads have not begun to hurt Mac sales.

Apps differentiates Apple
Apple has over 250 thousand apps available for download, including over 25,000 specifically for the iPad. Google's Android has about 120,000 apps for its users.

"We continue to believe the App Store remains a key differentiating factor for Apple's iPhone, iPad & iPod Touch. This software strategy enables a distinctive "stickiness," which should enhance customer loyalty/retention over the long term as "apps" personalize devices to levels that competitive imitations cannot match," Reitz said.

On September 1, Apple disclosed that customers have downloaded over 6.5 billion apps from the app store in total since inception in July 2008.

More users who buy and use apps over cellular networks will result in high subsidies from carriers, which translates to high margins for Apple.

Recently, UBS analyst Maynard Um, who has a "buy" rating on Apple stock, raised his 2010 profit estimate for Apple to $14.51 a share from $14.50 a share. Street analysts, on average, are expecting Apple to earn $14.44 a share in 2010.

Moreover, at its September 1 event, Apple, announced its new iPod line, updating three of the four product sets (including the shuffle, nano and touch), and an update to Apple TV. 

Ibtimes

International Business Times, The Global Business News Leader

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