Acer sees tablet prices falling to netbook level if volumes pick up

Acer, leader in India’s netbook — the no-frills laptop — market has recently launched a slew of tablets and hybrid devices (Rs27,000-32,000), even as the netbook sales have slowed down compared to a year ago. Even as analysts believe that tablet sales will probably come at the cost of netbook sales, Acer thinks that is not yet the case because of the price differential. However, if tablets as a device category gains consumer acceptance and sales volumes increase, then prices will definitely come down, says Acer’s India managing director W S Mukund and its chief marketing officer S Rajendran told DNA.

Excerpts from the interview.

Will tablets grow at the cost of netbook sales as users move to the new device category?
Mukund: This is the ultra mobile category, what comes closest to it is the netbook. In terms of price range, netbooks today are available at around Rs15,000 and this is around Rs27,000 So this is a different category altogether. Netbook, I would say, is a balance between content creation and consumption while a tablet is more about consumption and on the go consumption, so we feel that it is opening up new category of devices. So I don’t think it would cannibalise into the existing product categories.

Rajendran: We have kept aside a branding and marketing budget of $1 million (Rs4.5 crore) for the Indian market to take the tablet proposition to consumers. This would go both into sales force training and broadcast and print advertising.

Is Netbook the fastest growing category for Acer in India?
Mukund: Yes it is, and we have held the No.1 position for nearly two years and we continue to push that category. What is heartening to us is that Netbooks have started to gain acceptance in education segment. Acer traditionally has had a dominant presence in that space with about 37% market share, according to IDC. We have been active in higher education and K12, both in government and private education space. I think that will be a big opportunity.

Globally, where does India stand for Acer, in terms of netbooks sales?
Mukund: About 2% to 3% of our global netbook sales are in India. We have larger presence in desktop PCs in India. For desktops, India would be in the top five geographies in sales. The Indian netbook market is much smaller compared to other markets. We expect to see healthy PC sales here, say in the range of 5-7% year on year.

What are your expectations in terms of demand for tablet devices in India?
Mukund: Too early to say. Globally, analysts say that tablets could be up to 25% of laptop market. But in emerging markets like India, that share could be lower. How much lower, it is too early to say.
Industry analysts say that tablet prices would come down to Rs8,000-Rs10,000 levels.

Mukund: But yes, our industry is known for pricing coming down. As economies of scale come into play, the prices will go down. If volumes pick up, I think it would be fair to expect tablets to be available at the same price points as netbooks are today.

Some tablet makers are already trying to push tablets as the device of choice in schools. Are we talking tablets replacing netbooks as device of choice then?
Mukund: I think the key question there is do you expect the student to be creating content or consuming content. If it is only consumption, then it would be tablet, but if some creation also involved then netbook would be the choice. So more than the price, it would be the utility function that would be the key deciding factor.

Form factor, price, operating system all have been in a state of fast evolution in the last few months and in all likelihood will continue for some time. How do you stay relevant?
Rajendran: The market has been in a state of flux, but I think the haze is slowly settling down. In terms of size, there is a 7 inch and a 10 inch or thereabouts and in terms of operating system, Android is steadily gaining ground. So there is a tendency towards stability. What remains dynamic is the rate of adoption. Is it going to be replacement or new adoption? That we don’t know yet and it would be very risky to speculate. Content is what likely will be a critical component in terms of adoption. And then the volumes will take off. It was the same in the case of netbook also, it was not gradual, but rather a spike. We remain an indirect marketing company with sales through distributor channels. We are also investing in training, especially in the case of tablets, which is all about experience.