Monday, February 14, 2011

Tablets: Much Bigger Than You Think, Says Morgan Stanley

This is a new one on me, folks — a “blue paper” is what Morgan Stanley calls its 96-page report today on the prospects for tablet computing, authored by numerous analysts, including Kathryn Huberty, Mark Lipacis, Adam Holt and Ehud Gelblum.

The big picture: people don’t appreciate how big tablet computing can get, write the authors. They project shipments of more than 100 million by 2012. (To put that in perspective, analysts have been projecting Apple (AAPL) may ship between 30 and 40 million units of its iPad this year, and the entire industry may ship 50 million, according to several published estimates I’ve seen.)

The team did multiple surveys that they say canvased 8,000 consumers and 50 corporate CIOs. The findings show, they write, that tablets are set to be taken up by two thirds of corporations in 2011, either through direct purchase or allowing employees to take up the machines personally within the firewall. And the writers were “surprised,” they note, by what the data said about International demand: “While consensus views the tablet market as largely a U.S. consumer phenomenon, the international consumer survey data surprised us.”

Demand in major developed economies, phrased in the survey as “extreme interest in purchasing a tablet in the next 12 months, was higher than in the U.S., with only 11% of U.S. respondents surveyed saying yes, but 15% in France, 16% in Japan, 18% in Germany, 20% in the U.K., and a whopping 41% in China. And the overall international demand was 21%.

And while only 20% of tablet owners use the machines for content creation (as opposed to viewing, listening, etc.), below 56% on laptops, the authors “believe the rate of introduction of new mobile applications and faster processors could increase these figures over time.”

The best-positioned companies in this are the dominant tablet companies or the arms merchants: Apple, ARM Holdings (ARMH), Broadcom (BRCM), Samsung (SSNLF), and SanDisk (SNDK).

The worst-positioned, in the view of Morgan Stanley’s team, are Advanced Micro Devices (AMD), Dell (DELL), Lexmark (LXK), and Ricoh. And that bears a little explaining: Leaving aside AMD and Dell, Morgan Stanley believes tablets will actually help push users more toward the “paperless office,” and so they write that cannibalization of printing supplies is a much-understated potential area for cannibalization, and that that could hurt Ricoh and Lexmark.

Previously: AAPL: iPad Leading In IT ‘Consumerization,’ Says Barclays, February 11th, 2011.

Update: Since there seemed to be interest in the various parameters of the team’s report, I’m adding below two of the key charts from today’s report, which lay out some of the assumptions.

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