Tackling the tricky tablet
While Apple might have sold an impressive 3.27 million iPads in less than a quarter, it has done so in the absence of any major competitors. So, where are they?
Last week, the Streak, which Dell puts in the tablet category, went on sale for $300 with a two-year AT&T contract or $550 without a contract. But other than that, few tablets have actually hit the market, despite a spate of rumors about forthcoming tablets from the likes of HP, Samsung, Microsoft, and even Research In Motion (RIM).
From a slowdown in R&D spending during the recent recession to a lack of viable operating systems, analysts posit a number of reasons for the long wait on iPad alternatives. They're also revising forecasts considerably to account for the incredible lack of tablets in a market that has been hyping them since the first rumblings of the iPad began years previous.
The importance of a good OS
Sarah Rotman Epps, consumer product strategy analyst for Forrester Research, says the lack of viable tablet operating systems is one of the biggest reasons for the slow rollout of iPad competitors.
"iOS is unique in that it scales down to smartphones and up to tablets, but there's no other OS that's uniquely suited to tablets," she says, adding that the latest release of Android, which makes it slightly more tablet-friendly, just came out for developers within the past few weeks.
The same is true of Microsoft's Windows, which while the company has said it wants to offer support for tablets, its strategy has been anything but predictable. "There's just a lot of uncertainty in terms of how do we take a Windows operating system and turn it into a great tablet experience, especially one that's going up against Apple's iPad," Rotman Epps says.
And while Windows and Android eventually could have potential, Rotman Epps says that two lesser-known candidates could be way ahead of the pack. She notes that tablets based on webOS that are made by HP and tablets based on MeeGo, the operating system developed by Nokia and Intel, could be strong contenders in the space.
"Because HP and Nokia control both the hardware and the software, they have a degree of control that's potentially as great as Apple's to deliver a very satisfying consumer experience, whereas OEMs that are using Android and Windows are dependent on Google and Microsoft, respectively, for making modifications to their operating system," she says.
As has been seen with smartphone success recently, an available cache of downloadable apps could be a huge boon for any operating system. Rotman Epps says that more OEMs might choose Android because it's a free OS. Because more OEMs will choose Android, it could see the most interest from developers.
"Android is probably the most likely to see an immediate stock of apps," she says, adding that the game is important enough that she wouldn't be surprised to see Microsoft start paying developers to create apps for a tablet built around its operating system. As for apps, "Android has the most apps, but they're all designed for phones. I would imagine that just as the iPad supports iPhone apps but they don't look great, tablets that run on Android will have access to the Android phone apps, but the best apps will be the ones that are custom-created for that device."
Recession plus Apple equals no competition
While lack of operating systems in the game may be part of the problem, Jeff Orr of ABI Research thinks it's more than that. A recession, combined with Apple's bucking of the traditional rollout schedule, left many prospective tablet makers in a holding pattern, he says.
"In January at CES, there was no shortage of announcements. I think every company dipped their toe at that point and said, 'Here's what we think we can do.' And normally when you see those kinds of announcements at CES, they're pretty well baked, meaning that they should fall in line with a PC-type production cycle, which consists of a spring refresh and then a fall launch."
That hasn't happened, which Orr attributes at least in part to a slowdown in R&D at the end of 2009. "There was a lot of R&D spending that just didn't happen last year. If it couldn't prove that it was meeting the bottom line, it just didn't get funded, and a lot of tablets fell into that. They were too speculative," he says.
The second reason Orr cites for a lack of tablets is Apple managed to throw everyone off with its unorthodox launch and ship cycle for the iPad. Orr says companies typically stick to a fall launch with spring refresh. "I think partly it's a response to Apple putting an offering out there in January that starts shipping in April, and there was some interest in being able to watch and see what they did and use that as a benchmark," Orr says.
But it's not just Apple's timing that's odd, says Orr; it's also an anomaly in the industry because of its brand loyalty and strong mind share. He says Apple has managed to put up strong sales for a device that otherwise is a big question mark in the eyes of other OEMs.
Jobs did a good job of pitching the iPad at launch. "He didn't build the message on confidence," Orr says. "He built it on uncertainty. So that's a really unusual strategy for Apple, but I think it's indicative of where the market is at."
Orr postulates that Apple has a big strength in the fact that its customers are typically pretty open to buying almost anything the company brings to market. "Could Apple make it in the brick business? Could they put an Apple logo on a brick and sell it because it's Apple? Would they sell a million of them? Probably. They have a good reputation with their audience; people love the experience," he says.
Is there a tablet market?
One product does not a market make, Orr says, noting that with all of the uncertainties surrounding these devices, from use case to finding the right operating system, it's rather clear that there's not really a discernable market at all.
Both Forrester and ABI Research put their forecast for tablets shipments in the United States at right around 9 million to 10 million, with Forrester pegging its updated forecasts for global shipments at 13 million. To put that in perspective, consider that ABI estimates 36.3 million netbooks shipped in 2009, with projections for this year reaching 58 million.
To say the least, tablets have a long way to go, and they won't do it on Apple's back alone, which isn't to say that everyone thinks the space is unworkable.
iSuppli recently published numbers that show the component market, specifically wireless wide area network (WWAN) chipsets, is set for a big boost on tablet sales.
According to iSuppli's forecasts, 20.7 million embedded WWAN chipsets will be shipped to the slate-type tablet market, which includes Apple's iPad, by 2014. iSuppli believes that content/multimedia consumption devices in the slate form factor will be the primary and most significant driver for the use of embedded WWAN capability in the next five years.
Regardless of whether you fall on the boom or bust side of the tablet, most believe the holiday season will see a host of new tablet devices from a variety of notable OEMs. Orr says that the key to creating a vibrant tablet market will be differentiating from the iPad, with different distribution channels, as well as new feature sets that highlight different use cases.
"There's still a lot of room to grow; it's not Apple only. I do think this year will be very difficult for companies to get into the market because they're going to be benchmarked against Apple, but I think it's something that a lot of these companies need to do," Orr says.