Is the Notebook Market Slowing Down?

Is the notebook market slowing down? ThinkPanmure analyst Vijay Rakesh thinks so. This morning, in fact, he trimmed estimates on both Apple (AAPL) and Intel (INTC) on concerns about a slowdown in the notebook market. In particular, he thinks the notebook segment is being eroded by the new “netbooks,” ultra small PCs from Acer, Asustek, MSI and Dell (DELL).

“We believe the netbook market is starting to make inroads into the core notebook market as a more price-conscious consumer opts for the cheaper alternative,” he wrote in his Intel note this morning. Intel is addressing the netbook market with its Atom processor, so the company is not being cut out of the food chain; but Rakesh notes that Atom processors sell at much lower price points and carry thinner gross margins. The Atom, he notes, sells for $20-$40 and carries a 45% gross margin, while the Core2Duo sells for $140-$250 and carries a gross margin of 56%.

He notes that netbooks are dominating the notebook category on Amazon.com. And he’s right about that: the current list of Amazon’s top-selling notebooks is topped by two versions each of the Acer Aspire and Asus Eee; of the top 10, four are from Asus, three from Acer, one from MSI and two from Apple (AAPL).

Rakesh says that checks with retailers find that netbook sales are “swamping core notebook sales.” He says that Taiwan notebook manufacturers finds the same trend, “with netbooks ramping up while core notebooks are slowing down and potentially slowing down further” in the fourth quarter.

And as noted, he does not consider Intel the only casualty here. He writes today that low-priced netbooks “could dent Macbook sales” as consumer become more price-conscious and the global economy slows. “Our checks indicate that while Mac desktops and 3G iPhone sales have been doing well, the notebook market could be impacted in the peak back-to-school season” from the debut of netbooks from a number of manufacturers. He notes that the Street expects Mac notebook units to grow 15%-19% sequentially in the fiscal fourth quarter ending September; he cautions that “a netbook share gain in the notebook market, with consumers preferring lower-priced netbooks in the back-to-school season, could imply that the 15%-plus growth in the Mac notebook is a high watermark.”

Rakesh maintains his Buy ratings on both stocks. However, he cut his price target on Intel to $24, from $29, and he cut his EPS estimates for the company to $1.21. from $1.29 for this year, and to $1.35 from $1.53 for next year. (The Street sees $1.26 this year, $1.47 next year.)

For Apple, he cuts his target to $170, from $200, while trimming his FY 2008 estimate to $5.05 from $5.13, and his FY ‘09 forecast to $5.16, from $5.74. He is now way below the Street, which expects $5.21 this year and $6.03 next year.

JMP Securities' Samuel Wilson earlier this week raised the issue of the threat to Apple from the growing sales of netbooks.

Comments

[uncle:]

No.

2008 Sep 24 01:59 PM

[KenC:]

ThinkPanmure?!? They don't even cover Apple. At least, not officially, is this some guy's blog? The guy has NEVER been on an Apple conference call. And, he doesn't seem to even factor in iPhone's deferred revenues which should have normalized by 2009, in his 2009 eps numbers. What a joke.

2008 Sep 24 05:02 PM

[Apple at 60$:]

Maybe its not a typo but what is a netbook? Anybody has any updates on the talk between Apple and Chinamobile? I heard they are at the final stage of talk. Does any body know where i can look them up?

2008 Sep 25 03:52 PM

[chano:]

What does it take for commentators to understand? Whether it's computers or cars or clothes or anything that people buy....whatever brand offers value and avoids buyers' remorse (the regret you feel when you've bought a lemon) will always succeed. Sometimes people just have to buy a crap, under-specified item to learn about the value of quality. It's a necessary life lesson for many. The value of OS X, the hardware specs and the fine free software that ships with every Mac (a million miles better than WinPC style crapware btw) is worth more than BOTH the hardware and OS/App crapware combo from every WinPC vendor. That is just a fact. When these unfortunate innocents realise their blunder, the remorse will be there BIGTIME and they will resolve two things: never ever again buy a WinPC, and..... next time buy the real thing, an Apple Mac. From the only company that has a passion to please its customers it seems. It takes time to get the msg across, but if you deliver on the promise ...it works. And it works. And it's working. Never mind the market madness. Look at the brand emerging.

2008 Sep 27 02:56 AM