Mobile Computing Trend: Tablets Will Supplant Netbooks by 2012

Morgan Stanley analyst Katy Huberty has raised her projections on not only Apple's iPad but the tablet market in general, predicting that tablets will outsell netbooks by 2012 as Apple ramps the iPad production and other vendors join the fray.

The prediction came in a research note on Apple (NASDAQ: AAPL), which actually lost a little ground on Wall Street following the Monday iPhone announcements at the Worldwide Developer Conference. The stock opened the week at $255 but fell to $251 on Monday and closed Wednesday at $243.

Huberty, though, raised her price target to $332 from $310 and in her "bullish" scenario, said it could hit $440 by May 2011. Part of this was attributed to the iPad, which she expects will ship 10 million units in calendar 2010. Just last month she predicted sales of six million units.

Mobile Internet Leads the Tablet Trend

"We continue to believe the mobile Internet will ramp faster than the desktop Internet and will be bigger than most people think. A recent sign of this trend is our increased confidence in the outlook for iPad and tablet PC demand broadly given 1) strong initial iPad demand in the U.S. and abroad, 2) increasing evidence of netbook cannibalization, 3)early iPad usage patterns, and 4) the growing pipeline of tablet OEM announcements that signal investment in this emerging category," she wrote.

One of those signs, taken from NPD data, is that netbook sales fell 13 percent year-over-year in the month of April after a 45 percent year-over-year gain for the first quarter. The chart citing NPD datashows the once-high flying netbook market has come crashing down very fast in 2010.

Morgan Stanley now expects global tablet unit sales to reach 12 million units in calendar year 2010, with 10 million of those 12 million being iPads, and 45.5 million by calendar year 2012. By then the competition should heat up and Apple will account for only 20 million of the 45.5 million units sold.

Morgan Stanley has also reduced netbook unit estimates to 36.1 million units in 2010, down from prior estimates for 40 million, with unit growth reaching 42.7 million by 2012.

Huberty thinks the netbook phenomenon may have peaked and tablet sales will overtake netbooks because people are finding the iPad works out quite well as a computing device.

"We believe that early iPad usage data provides insight that supports our view of iPad/Tablets as a computing device. Our analysis of daily Internet page views on various devices suggests that iPad Internet usage is already well above those of smartphones and closer to traditional PCs," she wrote.

Mobile Apps for Mobile Computing on iPad

Why is this important? Web browsing is one of the most important computing tasks for the average user and early adaptors are realizing that they can gain a very similar experience on the iPad as on a PC. The iPad has a 9.7-inch screen, while smartphones are less than four inches in size.

"Based on our experience with iPad Web browsing, we would not be surprised to see tablet daily Internet usage exceed traditional PC Internet usage in the coming years," Huberty wrote.

She also noted that the top 50 App downloads on the iPad lean more toward productivity and content, while the iPhone/iPod Touch tend to lean much more heavily toward gaming.

Andy Patrizio is a senior editor at