Service Sector Might Be Savior for Second-Tier Tablets

RIM blackberry tablet

Most Best Buy (NYSE:BBY) stores in the metropolitan New York area have sold out of Hewlett-Packard‘s (NYSE:HPQ) TouchPad tablet computer. Other retailers in the area have as well.

That undoubtedly would be great news for the company provided it still was the beginning of July, when the TouchPad had just released at retail prices at or above $399. However, the tablet sold out because retailers began liquidating the device, selling it for as little as $99 in some cases. Hewlett-Packard announced last week that it was abandoning the mobile market and even considering selling off its consumer PC business. The competition has simply gotten too fierce.

The tablet market is looking rough for all competitors lusting after Apple‘s (NASDAQ:AAPL) increasing iPad sales. Research in Motion‘s (NASDAQ:RIMM) PlayBook has struggled to connect with consumers. Google‘s (NASDAQ:GOOG) acquisition of Motorola (NYSE:MMI) was met with concern considering how that company’s Xoom tablet has been received.

Leading PC makers Acer and Lenovo have both publicly stated that they think “iPad fever” is going to decline, but the question is when? And why? Tablet makers can’t wait for consumers to become weary of iPad-mania and must start reconsidering new ways to market their wares. For RIM, Google and others, it’s time to start chasing the service market. Particularly retail.

Hewlett-Packard should be kicking itself right now. It sold off the subsidiary that could have made the TouchPad a hit more than 10 years ago. VeriFone (NYSE:PAY), the manufacturer of electronic payment devices, is spending large sums in its push to become a major player in the mobile payments business. VeriFone CEO Douglas Bergeron told Bloomberg that he expects to spend as much $1 billion per year to grow VeriFone’s presence in new markets. He believes they’ll acquire one new company per year for as much as $700 million alone. VeriFone already is partnering with major players in the mobile market to expand its efforts, such as Google with its Google Wallet mobile payment service and the VeriFone-made PAYware for Apple’s iPhone.

For struggling technology companies looking for a place for their tablets, partners like VeriFone are going to be essential. Research in Motion, Dell (NASDAQ:DELL), Samsung (PINK:SSNLF) and others need to stop pursuing the consumer market and instead turn their eyes to the service industry. Their tablets might not be flying off shelves, but as low-cost options marketed to retailers as customer service tools and checkout tools using VeriFone’s already widely used software, they can at least see a healthy return on investment.

The time to strike is now. Lowe’s (NYSE:LOW) is distributing 42,000 mobile devices for use in its stores between now and January. Nordstrom (NYSE:JWN) and Urban Outfitters (NASDAQ:URBN) have started using them, too. As All Things Digital reports, though, these retailers and others are using Apple’s devices. Those Apple devices aren’t built specifically for processing mobile payments yet.

Google already enjoys a partnership with VeriFone, so it’s a likely candidate for building a relationship that sees a mobile payment-ready, Motorola-made tablet hitting the market in 2012 or 2013. RIM and others need to seek out similar partnerships. It’s a logical alternative to waiting for the iPad to become unpopular.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, https://investorplace.com/2011/08/tablet-computers-hpq-ipad-rimm-samsung-google/.

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