AAPL, I was wrong...Bernstein on the iPad

Bernstein Initial reaction: Stretched out Touch.
Now: “By any account, the iPad is a runaway success of unprecedented proportion.”

• In the first 80 days, AAPL sold 3M units, the current run rate looks to be closer to 4.5M/quarter. This is destroying all previous records of consumer electronics adoption.
• At the current pace, the iPad is annualizing around $12B in sales.
• Bernstein is forecasting 18M units for 2011 (bullish 2011 estimates have approached the 30M unit mark, translating to $20B in sales.)
• The US market is 45%, about $9B—the total US consumer PC category is about $25B ($19B note/netbooks)

PC’s are feeling the bite.

• In an environment where consumers’ consumption dollars are limited, they are choosing the iPad.
• Using NPD data, unit growth rate for consumer PC’s as of March (just prior to the iPad introduction), was 25%. By June, three months after the iPad, the rate had dropped to 8%, as of August 3%.
• At the notebook level, it’s even more pronounced. Growth fell from 28% in March, to 8% in June, to 1% in August. Consumer notebook sales are on the verge of declining on a y/y basis—this is the first time since the data series began 2005—when y/y growth was 14%.

Cannibalism is happening.

• The iPad is sucking up dollars that would be used to buy other discretionary items (TV and SLR camera sales have declined as well).
• Best Buy is a good example—the cannibalization of the netbook/notebook category was material.
• This could continue into the holiday season—if the luster of a touch screen is enough to draw the money toward it.