Remember a year ago, when netbooks were the fastest growing segment of the PC market?
And not ever again, as far as Goldman Sachs is concerned.
Because Apple’s iPad is going to wipe the netbook market out, says Goldman. (Sorry about that, Microsoft. Netbooks were a headache for you, too, because of the lower software price-points and Linux threat, but now even those low price points are going to zero).
Goldman offers a bunch of touchy-feely reasons why iPads are so revolutionary, cleverely packaged into 5 C’s:
1. Consumption – iPad focused squarely on information consumption versus information production: At its core, we think the iPad’s industrial design suggests a radical departure from previous PC-centric designs. The very idea of a device that looks like “just a big screen” suggests what users should do with the device – namely consume information, with limited ability to manipulate it. The lack of a physical keyboard suggests that the primary purpose of the device is not for inputting large amounts of information, but instead selecting among options, or performing light editing using a soft keyboard.
2. Content – iPad relies on tight integration with content sources: By linking the device directly with its iTunes and App Store products, Apple has created an easy-to-use, direct conduit between users and a vast library of content that is custom-tailored for the iPad (including movies, TV shows, music, e-books, magazines, games, and productivity applications) – as well as the full spectrum of content currently available on the internet.
3. Connected – Multiple options ensure the iPad is connected to the internet: By integrating options for both WiFi and 3G connectivity, Apple has helped ensure that users have constant access to the content sources described above. We would contrast this to the existing situation in PCs, where the penetration of 3G connectivity remains very low, and the amount of setup required for WiFi (in terms of steps to complete and complexity of the configuration process) remains relatively high.
4. Constant operation – iPad is an “instant on” device with all-day battery life: One of the most readily apparent differences between the iPad and notebook or desktop PCs is the iPad’s long battery life, which at 10 hours is 2-5 times longer than a notebook (depending on screen brightness). In addition, the iPad allows the user to “turn on” the device instantly – within 2 seconds – and begin using it immediately. This is in sharp contrast to existing PCs, which typically take 15-60 seconds to resume from a standby or sleep state. We believe this makes the iPad more responsive to a user’s spontaneous needs for information – such as checking the weather, a movie time, or sports scores.
5. Commerce – Apple’s ecosystem ensures that users are always “ready to buy”: By fully integrating a user’s payment profile information for iTunes, Apple removes the “barriers to buy” for consumers. In other words, by streamlining the purchase and delivery experience to a single click for nearly all types of content, users are always “ready to buy,” and are able to act on their impulse to buy much more directly than if they were required to input credit and billing information with every transaction.
And here’s a fun chart showing the percentage of hedge-fund IT folks who plan to replace netbooks with iPads in the next few years (amost 70%).
Photo: Goldman Sachs
A survey of 90 hedge fund CTOs isn’t exactly a comprehensive study, but it’s worth making one additional observation: Hedge funds are freakish about security. So if this many of them are planning to swap netbooks for iPads, it seems Apple has overcome the security concerns that initially hindered corporate iPhone adoption.
And of course that’s not the most powerful iPad-is-killing-the-netbook-business chart. The MOST powerful comes from Morgan Stanley, which shows what happened to netbook sales in the months leading up to the iPad launch:
Photo: Morgan Stanley
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