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Tablet Battle Takes to the Skies

A few days ago, I wrote about the stiff competition Apple’s (AAPL) latest iPads — expected to be unveiled next week — will be facing. It wasn’t that long ago that a new iPad release practically guaranteed lineups at Apple stores, when the news was full of stories about iPads supplanting laptops not just for consumers, but gaining traction in the business world as well.

When United Airlines (UAL) bought 11,000 iPads for pilots in 2011, it demonstrated the promise of Apple’s tablet — the move would save UAL 326,000 gallons of fuel each year by replacing 38 pounds of paper manuals, charts and operating manuals. But the most recent airline and tablet news has Delta (DAL) buying 11,000 Surface 2 tablets from Microsoft (MSFT) to distribute to its pilots.

This is exactly the kind of development that’s hurting Apple’s enterprise iPad gains … and it’s not an isolated case.

Consumers may still love the iPad, but businesses care more about the tablet form factor than the logo on the case. Once they got past the initial BYOD hurdle (where their employees would tote their own iPads into the office) and started to buy tablets in a more strategic fashion, enterprises changed the game.

The iPad began increasingly coming up on the short end of the stick, largely because tablets running Google’s (GOOG) Android operating system tend to be significantly cheaper than iPads.

Then there’s the Surface. Microsoft’s tablets haven’t exactly set the world on fire, but they do offer enterprise advantages based on their Windows heritage. A Delta representative interviewed by Newsday cited the ability to easily segregate personal content from corporate content on the Surface in addition to the fact that Delta’s training software is Windows-based as reasons for going with Microsoft’s tablets over iPads. And that’s despite an earlier test program where pilots were allowed to bring their own iPads.

The airline industry is filled with stories like this.

Despite choosing iPads for its pilots (citing $1.2 million yearly in fuel savings compared to paper manuals), American Airlines (AMR) chose Samsung (SSNLF) Galaxy Tab 10.1 tablets when it decided to offer 6,000 tablets to customers as in-flight entertainment devices in premium seating. The comparative cost likely factored into that decision, with the Samsung coming in at $100 less than the entry-level iPad.

American has apparently been happy with the arrangement. This year, the company announced that it was handing out Samsung tablets for staff rather than buy more iPads. After testing various devices, comparing ease of use and security, the airline invested in Galaxy Tabs and Galaxy Notes for business class customers, maintenance staff and flight attendants.

According to an interview in Business Insider, Samsung’s advantages include easier customization and the tablets’ SAFE (Samsung for Enterprise) security features. American has now bought 23,000 tablets from Samsung, compared to the initial 10,000 iPads purchased for the pilots.

When it comes time to upgrade the pilots’ tablets, it’s not difficult to picture a scenario where the Galaxy Tab replaces the iPad. When it comes to enterprise hardware, IT departments love security and standardization (which makes it easier for devices to interact with each other and reduces support costs).

But all is not lost in the sky for Apple. The U.S. Air Force picked up 18,000 iPads last year to reduce in-flight weight, and Hawaiian Airlines (HA) recently swapped out in-flight entertainment systems on 14 of its planes with 1,500 iPad Minis.

However, Apple faces a real and growing challenge in enterprise. The iPad made early inroads in the corporate world on the back of its popularity with consumers and its first-to-market advantage. But the tablet market is maturing, and while the iPad has remained consumer-focused with a premium price tag, the competition has evolved.

Thus the decision by Delta to choose a tablet that’s hasn’t sold well with consumers — it runs familiar Windows software and lets IT keep personal and corporate use of the tablet separate. It’s the same reason American passed over the iPad: The company wanted a cheaper, customizable, more secure device.

This battle for enterprise supremacy is not limited to the air (that’s just a very visible front); it’s playing out in businesses around the world. Apple isn’t down and out yet, but it’s no longer the only game in town and its overall tablet market share continues to slide. Microsoft isn’t giving up on the tablet game despite its early stumbles, and Samsung is coming on strong.

There’s a risk that the “mother of all markets” as Apple CEO Tim Cook has described tablets, could turn into a repeat of decades ago when cheaper, more configurable and Windows PCs left Apple behind to dominate the enterprise PC market.

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

Article printed from InvestorPlace Media, https://investorplace.com/2013/10/tablet-battle-takes-skies/.

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