ChangeWave Research: Consumer Tablet, PC and eReader Buying

Consumer Tablets, PCs and eReaders: 90 Day Outlook

Tablets Stay Hot even as PC Market Continues to Tighten

Andy Golub and Paul Carton

Overview: The tablet market has grown exponentially over the past 18 months, cannibalizing a growing portion of consumer PC sales in the process.

An August 1-12 ChangeWave survey of 2,969 respondents has looked at the latest trends in consumer PCs and tablets – including customer satisfaction, future demand, and competition among manufacturers to cut Apple’s (AAPL) commanding share of the tablet market. ChangeWave Research is a division of The 451 Group.

The new survey also took a close-up look at the eReader market.

Momentum for Tablets Continues

ChangeWave has been tracking the tablet market since the launch of the original iPad in March 2010. Similar to previously, our latest survey shows explosive tablet growth, with 21% of respondents saying they now own the device – a 4-pt leap since our May survey.

Do you currently own a Tablet device?

Current
Survey
Aug ‘11 / Previous
Survey
May ‘11 / Previous
Survey
Feb ‘11 / Previous
Survey
Nov ‘10
Yes / 21% / 17% / 14% / 7%

iPad Dominates Market. Apple continues to rule the market with 18% of survey respondents saying they now own an iPad – 4-pts higher than previously and more than triple the results of a year ago.

Do you currently own an Apple iPad?

*Note: iPad 2 = 8%; Original iPad = 10%

Future Tablet Demand. Looking ahead, better than one-in-four respondents (27%) say they plan on buying a tablet device at some point in the future – 1-pt higher than previously.

Focusing only on the next 90 days, 6% say they’ll buy a tablet within that time period. While that’s 1-pt less than we saw in May, remember that our May survey was conducted immediately after the iPad 2 release, when short term demand was at its peak.

Apple’s unparalleled strength in the market continues even as more and more companies enter the fray with their own tablet devices.

(FOR THOSE BUYING A TABLET DEVICE IN THE FUTURE) Who is the manufacturer and what tablet device are you planning on buying?

*The H-P Touchpad was preferred by 2% of future buyers but was subsequently discontinued.

A total of 85% of planned tablet buyers say they’ll purchase an iPad – 1-pt higher than the previous survey and the second highest level of the past year.

Samsung (4%; up 2-pts) is currently the next closest competitor followed by the BlackBerry PlayBook (2%; down 1-pt). We note that the Motorola Xoom (1%) has dropped 3-pts in terms of planned purchases since the previous survey.

A key reason for the iPad’s exceptional lead can be found in its customer satisfaction rating. A total of 70% of all iPad owners say they’re Very Satisfied with their device – dwarfing the 42% Very Satisfied rating of all the other manufacturers combined.

Attack of the Tablets

For the past four quarters we have been tracking the impact of tablets on the demand for other electronic products – often referred to in the industry as tablet cannibalization. In this regard, we asked tablet owners whether there were any other products that they had originally planned on buying but have put on hold or canceled in order to purchase a tablet.

Among the electronic products negatively affected by Tablets, both PCs and eReaders have most felt the brunt of the explosion in Tablet demand.

In terms of PCs, 13% of tablet owners say they’ve delayed or canceled a Laptop purchase because they bought a tablet, and 4% say they delayed/canceled a Desktop purchase.

In terms of eReaders, 16% of Tablet owners say they’ve delayed or canceled an eReader purchase because they bought a tablet.

That said, let’s take a closer look at both the PC and eReader markets.

PC Demand Remains Sluggish

Just 7% of respondents say they plan on buying a laptop and 3.5% a desktop over the next 90 days – the second lowest demand findings of the past three years. The downturn in demand is clearly reflective of the impact tablets are having on the consumer marketplace.

Apple Bucks the Trend. Ironically, in the face of weaker overall PC demand Apple continues to show strong momentum there as well. Better than one-in-three planned laptop buyers (35%) say they’ll purchase a Mac laptop – just 1-pt off Apple’s all-time high.

MacBook Air Driving Growth. Apple’s recently refreshed line of MacBook Air laptops is a key driver behind this continued strong demand. The latest MacBook Air features Core i5 processors, a backlit keyboard, and ‘Thunderbolt’ connectivity, which allows for faster connection speeds with mobile devices and peripherals.

While 17% of respondents who bought an Apple PC in the past 90 days say they got a MacBook Air, that number jumps to 25% among planned purchasers going forward:

Apple Desktops. In our May survey, Apple desktops hit an all-time high in large part due to its newly refreshed line of iMac computers. While the August results show Apple (29%) off 3-pts in terms of desktop planned purchases -- nonetheless they remain at their second highest level of the past two years.

Similar to the tablet market, a key reason for Apple’s Mac momentum lies in its customer satisfaction rating. Nearly three-quarters of Apple Mac owners (74%) say they’re Very Satisfied with their computer. In comparison, ASUS is at 68% Very Satisfied, followed by Toshiba (66%), with Dell (62%) and H-P (58%) still further behind.

Dell Demand. ChangeWave has tracked Dell’s consumer PC challenges for years. After their latest earnings announcement, Bloomberg reported “lackluster demand from consumers and market share gains by Apple weighing on Dell results.” This echoed what we found for Dell in our May Consumer PC survey report.

Going forward consumer demand for Dell PCs is mixed, with planned laptop buying (17%) down 2-pts. And while Dell desktop buying (26%) is up 4-pts, both of these levels remain historically low in comparison to earlier years.

Keep in mind that just 20% of Dell’s PC business comes from consumer sales, while 80% is corporate. An upcoming ChangeWave Corporate IT Spending report will take a close look at enterprise PC demand for Dell and other manufacturers.

Hewlett-Packard Mixed. This survey was conducted just before Hewlett-Packard (HPQ) announced it was spinning off its PC business. For a long time, H-P has been facing a steep uphill battle in our PC demand surveys and the current one is no different. While planned

H-P laptop buying (20%) is up 3-pts, desktop purchases (18%) are down 2-pts.

Note that approximately 70% of H-P’s sales come from outside the U.S., whereas our ChangeWave surveys focus primarily on the U.S. and Canadian markets.

Lenovo. The survey results show a major jump in Lenovo PC demand going forward, with 11% of planned buyers saying they’ll purchase a Lenovo laptop – 5-pts higher than previously. This is likely attributable to their new line of ThinkPads – thin, lightweight mobile computers which some analysts believe can compete with the MacBook Air.

Lenovo desktops (6%; up 3-pts) are also showing momentum in the ChangeWave survey.

Other Findings

·  Netbooks, which have been on a precipitous slide for two years, bounced off their lows in the current survey – and are up 5-pts to 14%. One reason for the increase is the recent release of Chromebooks – a new type of netbook running off Google’s Chrome operating system.

·  Preferred Operating Systems. When respondents were asked which OS they preferred for their PC, Apple Mac OS X (32%; up 4-pts) showed the most momentum even though Microsoft’s Windows 7 (59%; down 8-pts) continues to hold a huge lead.

Kindle vs. Nook vs. the iPad: A Look at the eReader Market

As previously noted, tablets have clearly had a cannibalizing effect on the eReader market. But in the past 12 months Amazon and Barnes and Noble have both fought back successfully with new eReader devices and slashed prices – and both are now working on their own eReader tablets.

An Amazon Kindle tablet could potentially be released as early as this fall, and the Barnes and Noble Nook Color already has several tablet features including email, a touch screen and web browser functionality. That said, our latest survey took a look at eReader market share and found surprisingly little has changed since last quarter in the battle among providers.

Better than one-in-two eReader owners say they own an Amazon Kindle (54%) – up 3-pts from previously, while the Apple’s iPad (38%; up 1-pt) and Barnes & Noble’s Nook (12%; up 2-pts) have also shown growth. The Sony Reader ranks far behind the rest with just 3%.

Which of the following eBook Readers do you currently own?

*Includes only iPad owners who consider theirdeviceto be an eReader.

In terms of customer satisfaction, two-thirds of iPad owners (67%) who consider their device to be an eReader say they’re Very Satisfied with the device, compared to 58% of Kindle owners. Barnes and Noble’s Nook ranks 3rd with a 46% Very Satisfied rating.

Online Bookstores – Amazon Leads. The biggest difference between the iPad and the Kindle is in the online bookstore buying behavior of its users – where by a wide margin Amazon remains the leader.

Virtually all Kindle owners (96%) say they use the Kindle Bookstore, while only 12% report they make purchases from the iBookstore. On the other hand, iPad owners are almost as likely to use the Kindle Bookstore (53%) as the iBookstore (56%).

The Kindle Bookstore thus provides a major strategic advantage for Amazon – and their wide lead has enabled them to absorb major price cuts for the Kindle in recent quarters with relative ease. Moreover, with two-thirds of all eReader owners saying they use the Kindle Bookstore (65%) – compared to just 25% who use the Apple bookstore – it’s an advantage they’ll continue to leverage going forward.

Future eReader Demand Trends. Looking at planned buying for the next 90 days, the Apple iPad (39%; unchanged) continues to maintain its share of the eReader market, while the Kindle (31%; down 4-pts) and Nook (10%; down 3-pts) are each down slightly.

But when we asked respondents how likely they would be to purchase a Kindle Tablet if it had a color screen and web browser in addition to eReader functionality, we found significant consumer interest.

The Wall Street Journal recently reported on Amazon’s plans to release a new Android-based Kindle tablet device featuring a 9-inch color screen and web browsing – in addition to eReader functionality. How likely is it that you will buy a new Amazon Kindle tablet for yourself or someone else when it becomes available?

With 2% of respondents saying they’re Very Likely to buy a Kindle Tablet when one becomes available and 12% saying they’re Somewhat Likely, the results are clearly encouraging for Amazon if it can actually produce a competitive Tablet product.

Importantly, Amazon has a large base of loyal users familiar with their Kindle eReader, which could give them a big leg up when they enter the tablet market.

But to date no other manufacturer has come even close to challenging Apple’s stranglehold on the tablet market, and it remains to be seen whether Amazon can muster the wherewithal to succeed where others have thus far failed.

Bottom Line. The lines continue to blur between the Tablet, PC and eReader markets, with tablets generally – and the iPad in particular – acting as a major disruptive technology. In response, PC manufacturers have rushed to develop lighter and slimmer laptops even as eReader manufacturers add web browsing and email functionality.

By a wide margin, the ChangeWave survey results show Apple remains best positioned among the major manufacturers:

·  Apple continues its unparalleled domination of the tablet market despite an onslaught of new competitors.

·  Apple Mac computers have the most momentum going forward among consumers. In this regard, the survey shows a major leap in MacBook Air demand going forward.

·  The iPad remains a powerful alternative to traditional eReader devices and has momentum in that market as well.

Both Dell and H-P so far have proven unable to counteract the surging Tablet threat. Their own tablets have underperformed in our ChangeWave surveys, even as they both continue to lose PC market share. Recently H-P announced it was abandoning the tablet market and its webOS operating system altogether, and it now plans to spin off its personal computer unit.

The competitor that appears most capable of launching at least a partial challenge to Apple is Amazon. But for now Apple remains ideally positioned for continued strong growth – while the rest still have a huge mountain to climb before they’ll be able to launch a true competitive challenge.

Summary of Key Findings

Summary of Key Findings

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The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.


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