Will the iPad Kill the Netbook?

Netbook sales were down in the first quarter. That happens to coincide with the three months leading up to the Apple iPad's release, which will hit stores Saturday. Is this correlation or causation? Some articles noting the decline in netbook sales suggest there's a relationship between these two events, but differences in the target consumers for these devices suggest otherwise.

The argument takes the following form, as provided by Bloomberg:

Apple's (AAPL) iPad is helping cool the computer industry's netbook fever. Apple Chief Executive Steve Jobs has made no secret of his disdain for the popular, inexpensive mini-notebooks. "Netbooks aren't better than anything. They're just cheap laptops," Jobs said at the Jan. 27 launch of the iPad tablet computer in San Francisco.

PC makers are starting to worry that consumers agree. The sales growth of netbooks, priced from $200 to $500 and resembling shrunk-down laptops, slowed markedly in the first quarter, according to market researcher IDC.

Yet, the devices are different in so many ways that it's hard to see how anticipation of the iPad could be eating that much into netbook sales.

Price Disparity

The most obvious difference is price. As the excerpt above mentions, netbooks tend to be a few hundred dollars each, with $500 at the very top of the range. Yet, the iPad starts at $500. It isn't competing on the same playing field as netbooks. Consumers prepared to spend $500 or more would more likely be purchasing a full-size laptop.

Different Strengths

The two gadgets also have mostly contrasting strengths:


A netbook is much more functional for working on. Anyone who wants a small device for business travel that can handle spreadsheets, PowerPoint presentations or documents probably won't find an iPad very appealing. A netbook, however, can accomplish that task.


Yet, the iPad is better for e-reading than a netbook. Anyone looking for a device providing that capability probably isn't in the market for a netbook anyway. They might be considering a Kindle or a nook.


Of course, there are some overlapping strengths, the most obvious of which is Internet surfing. Both accomplish this task well, though anyone intending on writing lengthy e-mails would probably prefer a netbook's keyboard to the iPad's on-screen keypad. Yet, there may be some consumers who would have bought a netbook for simple Internet capabilities that now turn to the iPad. Due to the price point disparity, however, that number isn't likely large enough to explain a drastic decline in netbook sales growth.

Simply Buyer Fatigue

How big is that drop in sales growth? It's huge. Bloomberg reports:

Netbook shipments to retailers from January through March are expected to grow 33.6% compared with a year ago, to 4.8 million units, IDC says. That's significantly slower growth than in the first quarter of 2009, when netbook sales leapt 872%, to 3.6 million units.

Did someone out there expect netbook sales to grow at 872% forever? If so, then one day Asus and Acer would be the most powerful corporations in the world. That level of expansion just isn't sustainable. The growth of netbooks is likely beginning to plateau. Netbooks have become so popular so quickly that they're more likely just experiencing some buyer fatigue. 33.6% growth is still pretty solid, however.

There will certainly be people who buy the iPad, but there will also be others who continue to purchase netbooks. The target consumers groups for these two devices have a little overlap, but only a little. In its current form, the iPad shouldn't severely limit the sales of netbooks.