Tablets, smartphones attract holiday shoppers

Jefferies & Co. said in its Wireless and Handsets weekly that tablet and smartphone sell-through has been strong at the start of the holiday shopping season. In particular, checks indicate Research In Motion Ltd. (RIMM) shipments have been solid in Europe (in addition to U.S. Torch strength).

Research In Motion announced its acquisition of Swedish user interface design company The Astonishing Tribe (TAT) as the BlackBerry maker seeks to enhance the look and functionality of its screens ahead of the launch of its PlayBook tablet.

We had already thought that the QNX operating system (OS) was excellent, but it could be even better after TAT incorporates some of its innovative 3D-like designs. TAT's previous work on Android interfaces has been well received by reviewers and consumers, said Peter Misek, an analyst at Jefferies.

According to mobile analytics firm Flurry, smartphone activations were up 31 percent worldwide over the Thanksgiving weekend versus a typical up by 5 percent. A new application (Jam11, currently in beta) allows the streaming of an iTunes library to a Blackberry smartphone.

Motorola Inc.'s (MOT) major upcoming new phone (Misek expects in Q1), reportedly has Tegra 2, about 4-inch screen, and a quite thin form factor according to a photo posted on Engadget.

Tablets

Consensus expectations for tablet shipments in 2011 appears to be shifting more toward about 50 million from previous forecasts closer to about 40 million. We remain more bullish than market expectations regarding tablet adoption due to tablets' superior browsing experience and form factor, said Peter Misek.

Gartner expects 80 percent of businesses will support employees using tablets by 2013. Misek said he has been surprised at the number of enterprise that are already testing Apple Inc.'s (AAPL) iPad for corporate adoption. That said, Misek still estimates that corporate tablets will not ramp substantially until 2012.

Advanced Micro Devices, Inc.'s (AMD) Chief Executive Officer Dirk Meyer conducted an interview with DigiTimes and noted that for now, tablet PCs are simply a supplemental product of the traditional PC and that volumes were unlikely to take off until pricing falls below $300.

We are still optimistic about the netbook market. According to our internal data, netbook shipments in 2011 will still see an on-year growth of 20 percent, similar to that of traditional notebooks, meaning netbook shipments will be able to reach 20 million to 30 million units next year, said Dirk Meyer.

DIRECTV (DTV) said it will consider offering a la carte sports channels and a basic channel package. DTV has an iPad app. Disaggregated pricing and lower-priced entry package would both line up with likely tablet video consumption patterns (e.g. watching live events while traveling, ad hoc programs, etc.).

Handsets

Apple passes RIM for top U.S. smartphone OS. Nielson's reports that in October Apple's smartphone OS had 28 percent share, compared to RIM's Blackberry OS at 27 percent, Android at 23 percent, and Microsoft Corp.'s (MSFT) Windows Mobile at 14 percent.

First-run theatrical films to be streamed by Netflix, Inc. (NFLX). Netflix announced a deal with FilmDistrict to license its films during the pay TV window a few months after their release on DVD. Normally the content would have been licensed to premium cable channels.

FilmDistrict is a small production company, but it bodes well for a future transition where less video living room content is consumed via cable and more is consumed via the Internet and likely facilitated by players like Netflix and Apple, said Peter Misek.

Small and mid-size panel makers see strength. November appears to be a record month for some, while first half of 2011 is also expected to be strong. Strong touch panel demand from handsets, DSCs and e-book readers was cited, according to Economic Daily News.

Notebooks

All the top notebook original equipment manufacturers (OEM) and their original design manufacturers (ODM) are shifting manufacturing to inland China and building out production in Chongqing and Chengdu to offset labor shortage issues along the coast. During the investment phase, margins are likely to be pressured throughout the supply chain.

Jefferies' Broadline Retail analyst Daniel Binder noted that for November Costco Wholesale Corp.'s (COST) TV sales were slightly better, posting a mid-to-high single digit decline on a low-single digit increase in unit sales and low-double digit decline in prices.

But there was additional weakness in Audio, Computer and Camera. At BJ's Wholesale Club Inc. (BJ), the strongest performing departments included electronics and video games. The weakest included computer equipment.

DigiTimes noted that Hewlett-Packard Co. (HPQ) shipment goal of 4 million notebooks in November is unlikely to be met. Also overall notebook shipments are likely to only be up 3 percent to 5 percent sequential for fourth quarter.

We think the negative notebook datapoints from retail and notebook ODM is largely being driven by tablet cannibalization. We would note that Best Buy Co. Inc. (BBY) includes tablets in its computer category so likely will not report the same weakness in November as seen by others, said Peter Misek.