Is Apple King of the Tablet Market?
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The mere mention of tablet computing will, in most, elicit the knee-jerk reaction of praise for Apple’s (NASDAQ: AAPL) iPad. Since the launch of the first version in 2010, the domination of the tablet market has been largely based on the hitherto unmatched combination of cost-effectiveness and high functionality.
It is not only to Apple’s credit, but also to others’ shame that the iPad goes almost unrivaled. Apple did much of the work popularizing the concept and how a tablet can improve your life. It also set the standard in weight, size and dimension, as seen by the fact that every tablet announced or released since the iPad looks almost exactly like it. It is also the case that it is only recently that companies have stopped trying to play catch up with the iPad, and trying instead to push beyond. It’s taking the advice of pro basketballer and legend Pistol Pete – “Don’t go to where the ball is, go to where it’s gonna be”.
Stepping out from behind Apple’s shadow is tough, but there are several ready for the challenge.
What Is Happening
Tablet computing is rapidly becoming the consumer method of choice, threatening to all but sink the PC market. Recently, Apple revealed its quarterly profit nearly doubled as iPads are flying off the shelves. It is expected that the sales of tablets will reach 375 million in the next 3 years, a compound annual growth rate of about 46 percent.
According to a report from market researcher Forrester Research, there will be 760 million tablets in use by 2016. Additionally, over the next few years, tablets will only increase in features, processing power, and better wireless capabilities which could, in turn, allow for options like full voice control, better accessory integration, and software that “anticipates a user's needs.”
Apple's iPad is responsible for creating a need which will only grow and expand across markets in the coming years. While other companies offer pieces of the puzzle and must work together to achieve results, Apple stands alone, and can thus control more market space than a combination of other companies.
To put it another way, Google's (NASDAQ: GOOG) Android mobile operating system is dependent upon a device for operation which Google outsources to partners such as Motorola. This is similar to Microsoft's (NASDAQ: MSFT) Windows 8, which is geared to work on both tablets and traditional PCs, but which Microsoft only produces the latter.
Therefore, it is obvious why Apple holds the upper hand in this market and it would take bold and powerful strides by competitors to loosen the death grip.
The Competition
So what is the competition trying? The most notable effort, one that succeeds in beating Apple at its own game by creating a market, is a hybrid smartphone/PC.
Google has joined with it’s partner, Motorola and its homegrown software called "Webtop" that made the Atrix phone act like a computer once it was docked. The success of Google’s Android has established Google as a key player in mobile computing devices, and with the potential for businesses to consolidate their many devices, the new hybrid product looks incredibly appealing.
The idea of using a phone as a fully functional computer is over a decade old, with proponents such as Bill Gates and Steve Jobs toying with the possibilities. Even so, neither Microsoft nor Apple have made a move in the “smartphones-to-PC” market giving Motorola and Google a chance to gain footing.
The other option was a combined Laptop-Tablet device. It was a reasonable suggestion, however, in a call, Apple Chief Executive Tim Cook dismissed the idea of a hybrid MacBook-iPad device. He made the strange analogy that, "You can converge a toaster and a refrigerator, but those things are probably not going be pleasing to the user".
Regardless of Apple’s thoughts on the matter, there is one team not only willing to look at the possibility, but willing to sink some money into a prototype. As it happens, Intel (NASDAQ: INTC) has begun to push the Windows 8 laptop-tablet hybrid concept and has even shown off a sample unit to prove its case. This could be beneficial for both companies to establish market share with almost no competition from Apple - an important step for the future Windows 8 market.
Not only that, it is good press for Intel’s latest high-performance Ivy Bridge processors. With recent acknowledgement by Hewlett-Packard that it will use the quad-core processor in two of its all in one desktop models.
What Will Happen
There are two companies that stand out in the tablet market that make their own hardware and operating systems: HP and Research in Motion (NASDAQ: BBRY). The problem is that neither seem very good at competing, especially with a heavyweight like Apple.
RIM’s long awaited PlayBook update was pretty much laughable, with very little appeal to the consumer. HP is also struggling with which feature to emphasize. It’s great desktops don’t have touch capabilities yet (though are expected with the new models), and its TouchPad has unimpressive functionality.
That being said, even if Apple’s competitors were able to get past the market stranglehold, as well as the hardware and operating system issues, the main fight is against Apple efficiency. With iTunes and the ability for users to purchase music, movies, TV shows, and educational content, Apple is giving its customers a one-stop shop. Buy, download, sync, and take everything with you. If one adds the App Store to that equation, Apple is the epitome of convenience. The only possible competitor would be Google who shows promise in combining business and functionality with social media and networking.
Summary
In my opinion, Apple has decimated competition in the tablet market. Even though casualties have been suffered (RIP PlayBook and TouchPad), this is primarily because of the companies behind them and the halfhearted attempt at market entry. Though I predict continued strong performance from Apple, I see potential in some of these coming attractions.
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