Next AAPL iPad Faces Stiff Tablet Competition

AMZN, GOOG and others keep digging into market share

Next AAPL iPad Faces Stiff Tablet Competition

The appetite for tablets is slowing – down to the lowest level in two years — and sales forecasts are being cut. The devices are still in demand, but the early adopter market is being saturated, consumers are turning to less expensive 7-inch versions, and phablets have emerged as a cheaper alternative to buying both a smartphone and a tablet.

According to a Pacific Crest analyst, as sales slow Apple (AAPL) is in line to take the majority of the punishment. The company isn’t sitting still — Apple watchers have October 22 circled on their calendars as the date the company will unveil the next generation of its iPad and iPad Mini tablets — but there’s a real possibility that refreshed iPads won’t be enough to keep Apple’s lucrative tablet business from sliding further.

The coming holiday season will be ground zero for the next phase of the tablet war. Here’s what the major players are up to.

Apple

While smartphone rival Samsung (SSNLF) is notching up huge tablet gains, sales of iPads were down 14% last quarter compared to the previous year. The iPad now holds just one-third of the world tablet market it once owned, compared to more than 60% for devices running Google’s (GOOG) Android operating system.

Apple has stuck with the high-margin, premium hardware approach and stubbornly resists cutting prices. But competitors have caught up and are making it difficult to justify paying the so-called “Apple tax.”

If Apple announces an iPad Mini with a Retina display this month — addressing the primary complaint about its current offering (besides the price) — expect it to move as many as it can sell over the holidays. If it’s only able to offer up a refreshed look and spec-bump, that low resolution display will be very difficult to overlook.

A new, full-sized iPad with thinner bezel, A7 CPU and possibly even the iPhone 5S’s fingerprint sensor will spur upgraders, but the price point is not going to set holiday sales on fire.

Amazon

Amazon (AMZN) released a new line of Kindle Fire HDX tablets with killer specs and a pushbutton “Mayday” feature that summons instant technical support via video conference. A 7-inch Kindle Fire HDX with Mayday for consumers who are less comfortable with technology, a high-density display, beefy processor, 11 hours of battery life, complete integration with Amazon’s online media offerings and a $229 price tag is going to be a tough competitor.

For the budget-conscious, Amazon upgraded last year’s 7-inch Kindle Fire HD to offer a faster CPU, dual speakers and HD display at $139. Compare that to the cheapest iPad Mini at $329.

Google

Google continues to be a player with its Nexus series of tablets. The latest Nexus 7 — built by Asus — features a high-density 323 pixel-per-inch display. The current iPad Mini’s display manages just 163 PPI and even the iPad with Retina Display is currently at 264 PPI.

The Nexus 7 also features a fast quad-core processor, slimmer design and a $229 starting price. Even the most expensive version, complete with LTE connectivity comes in at just 20 bucks more than Apple’s cheapest WiFi iPad Mini.

Samsung

Samsung is on a tablet tear heading into the holidays. While it risks confusing the heck out of shoppers with a dizzying array of devices (26 different models are featured on its U.S. website), Samsung’s tablet sales surged 227% over last year.

As a vendor, it’s second only to Apple, and with Android now in a dominating lead for tablet OS marketshare, Samsung is front-and-center for many consumers. It offers tablets ranging in size from 7-inches to 10.1-inches, as well as phablets. And like Microsoft (MSFT), it’s offering up to $300 to anyone who turns in an existing mobile device for a new Samsung tablet.

Microsoft

Speaking of Microsoft, the company has new Surface 2 and Surface Pro 2 tablets for sale. Windows 8 may be a niche player in the tablet market, but it’s now at 4% after growing an impressive 527% since last year.

I wouldn’t get too excited, though. The majority of Windows tablet sales have been the Surface Pro variety — an expensive, heavy, laptop replacement that runs Windows 8 and is favored by businesses. Consumer-targeted Windows RT tablets have been a disaster. A smaller, cheaper version isn’t expected to arrive until next year. Don’t expect to see a lot of $449 Surface 2 tablets leaping off store shelves this holiday season, even with Microsoft offering a trade-in bounty on old iPads.

What’s Next for the Tablet Market?

Look for a veritable frenzy over the next few months. Amazon, Samsung and Google are likely to have killer holiday quarters — more so if that new iPad Mini has the same old display or a Retina version is in limited supply (as has been rumored).

In the longer term, with Apple seemingly determined to retain its margins, the iPad is destined to repeat the iPhone’s trajectory. Apple may have had a 95% stranglehold on the global tablet market just three years ago, but it’s now down to a third of that level and slipping. Android tablets could well hit the 80% level Android enjoys in the mobile space. As more consumers opt for a single device instead of buying both a smartphone and a tablet, Samsung’s phablet offerings put it in a strong position there as well. Windows RT, on the other hand, seems doomed to join BlackBerry’s (BBRY) PlayBook tablets in the also-ran category.

But unless Apple shows us something truly revolutionary with its next iPad, the tablet market isn’t looking so bright anymore.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/10/can-new-ipad-keep-apples-tablet-business-sliding/.

©2014 InvestorPlace Media, LLC

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