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iPad 3 could eat Mac

Just as the iPhone has pushed the iconic iPod music player to the margins of Apple’s product offerings, the launch of its third iPad is threatening to displace the company’s legacy Mac computer business as Apple’s flagship product line

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By Matt Hartley and Jameson Berkow

Apple Inc. is a company that has never shied away from eating its young.

In the eyes of chief executive Tim Cook, if Apple is to have one of its core businesses cannibalized by a competitor, that competitor had better be Apple itself.

Now, as the world waits expectantly for Apple’s mystery product announcement on Wednesday in San Francisco — where it is widely expected that the Silicon Valley giant will unveil the latest iteration of the iPad — it appears the Cupertino, Calif.-based company is once again on the verge of having one of its creations overshadow a past champion.

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Just as the iPhone has pushed the iconic iPod music player to the margins of Apple’s product offerings, with the launch of the iPad 3 or HD iPad (or whatever Apple plans to call its third iPad) Apple’s latest wunderkind is threatening to displace the company’s legacy Mac computer business as Apple’s flagship product line.

Frankly, that suits Mr. Cook just fine.

“From the first day it shipped, we thought that the tablet market would become larger than the PC market and it was just a matter of the time it took for that to occur,” Mr. Cook was quoted as saying last month at a Goldman Sachs investor conference. “I feel that stronger today than I did then…We don’t want to hold back one of our teams from doing the greatest, thing, even if it takes some sales from another product area.”Apple has lots of experience wrecking a perfectly dominant business unit.

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Despite revolutionizing the music industry a decade ago, sales of Apple’s iPods have fallen steadily in each of the past 11 quarters, as consumers have scooped up multifunction iPhones — which offer music playback — rather than stand-alone iPods.

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“I honestly do not think Apple is worried about cannibalizing their other products, because for the last dozen years, they have been their own most ruthless competitor,” said Leander Kahney, editor of the CultOfMac blog and author of three books about Apple.

“They have already sold more iPads in the last two years than they’ve sold Macs in the last 20 years. So why would they protect a much smaller business? I think Apple would be delighted to put the Mac out of business.”

Even though Apple has seen record sales of Mac computers over the past two years, the iPads have outsold Macs by a nearly two-to-one margin since the touchscreen tablet first went on sale. Apple has sold 55.28 million iPads, while at the same time, the company has sold 29.29 million Mac computers, albeit at a higher price point.

Indeed, ever since the first iPad was introduced in 2010, Apple has proven that consumers were anxious for a touchscreen computing device optimized for media consumption and Web browsing.

Now, combined with the rise of smartphones, consumers are looking to devices other than PCs for their computing, and PC sales are suffering as a result. Some analysts believe tablets will begin outselling PCs as soon as the second half of next year, thanks to the iPad and the proliferation of devices running Google Inc.’s Android software and Microsoft Corp.’s forthcoming Windows 8.

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However, that doesn’t mean everyone is willing to ditch their laptop. For many users, tablets such as the iPad are still mostly used for consuming media and other digital content, while laptop computers are still seen as productivity devices.

“For the average user at the end of the day, if you still have to pump out a document or do some work, then media tablets as they are designed today are not well suited to creation,” said Krista Napier, senior mobility analyst for market research firm IDC Canada.

“[The iPad] is an additive device and until we see something else, that is how we feel those devices are positioned today.”

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