Apple Inc. (AAPL) iPad Mini to take off like wildfire in China: Topeka

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Gartner’s preliminary Q3 PC data points to a solid annual volume increase (14.3% y/y) in Apple’s Mac segment in the US, with growth tempered somewhat by softness in the public market and a slowdown in consumer, according to Gartner. In a multi-device world, Apple is materially advantaged versus peers as its vertically integrated structure allows it to simultaneously address all three aspects of the compute market i.e. PCs, tablets and smartphones, effectively driving a virtuous circle of competitiveness. Moreover, much of the innovation comes in software, enhanced by a broad range of “i-Services” which are hard to replicate. Credit Suisse says in a research report that PCs are now ‘A Continued Fade.’ This will benefit Apple Inc. (NASDAQ:AAPL), which relies more and more on tablets and smartphones for revenue, and hurt traditional PC makers.

Apple Inc. (AAPL) iPad Mini to take off like wildfire in China: Topeka

Apple Inc. (NASDAQ:AAPL) saw US units grow +14.3% y/y yet declined 6.1% q/q given the Mac refresh in the June quarter. As a result, domestic share grew to 13.6% from 12.0% in the prior quarter and 12.5% in the year prior period. With the introduction of the “iPadmini” Credit Suisse expects continued compute dollars to shift away from traditional PCs
towards tablets and smartphones.

While Gartner has yet to disclose Apple Inc. (NASDAQ:AAPL)’s worldwide shipments, it indicated that the company remained the number three player in the US while gaining about a point of market share. However, the company’s shipments declined by 6% Y/Y while the total market fell by 14% in the US. Apple Inc. (NASDAQ:AAPL)’s performance was also impacted by the consumer slowdown in the region.

Apple Inc. (NASDAQ:AAPL) is materially advantaged versus peers as its vertically integrated structure allows it to simultaneously address all aspects of the compute market i.e. PCs, tablets and smartphones.

Hewlett-Packard Company (NYSE:HPQ) saw 3Q units improve 4% q/q and down 16.4% y/y to 13.6mn units, driving worldwide market share to 15.5% up from 15.3% in the prior quarter but still well below 17.0% a year ago.

Dell Inc. (NASDAQ:DELL)’s PC units declined by -13.7% y/y and -1.4% q/q, and share fell to 10.5% from 11.0% in Q2 and 11.2% in 3Q11. The losses are consistent with the company’s recent comments regarding PC demand weakness and tablet cannibalization.

Topeka Capital markets note  that there is a resurgence in popularity around Apple Inc. (NASDAQ:AAPL)’s iPhone 4S given the recent price cuts and curiosity around the iPhone 5. There has been media speculation (e.g. iFeng) that the iPhone 5 could launch in October; however, they are sticking with our December estimate for now. Our conversations during our meetings and casual consumer interactions this week tells us that the iPad Mini will take off like wildfire in China.

When they discuss the smaller form factor and lower price point, the body language tells us that Apple Inc. (NASDAQ:AAPL) will finally be able to sell in volume an iPad product in mainland China and further participate in the ramp of China’s mobile Internet. Their meeting with Tencent made a strong impression on us and highlighted a deep platform that we believe is one of the best positioned in China to capitalize on the ramp of the mobile Internet in the coming years. With China’s mobile Internet poised to be one of the wonders of the tech world over the next decade, Tencent appears to have the platform to be the big winner in this space.

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