Will the iPad Dominate? Only If Apple Lets It.

As iSuppli analysis proved to us yesterday, the iPad should produce some "magical" money for Apple (Nasdaq: AAPL  ) , with the company estimated to reap anywhere from $240 to $351 in gross profit on each sale of a Wi-Fi-only version of the device. It's worth noting the 3G versions should prove even more profitable. Imagine iPad unit shipments reaching 25 million to 30 million in a couple of years (some suppliers estimate 2010 shipments reaching 8 million to 10 million), and factor in iTunes/App Store sales, and the product should be big business even for a company of Apple's size.

But for the iPad to reach those lofty levels, my guess is that it needs to establish a position in the tablet market closer to that of the iPod in the MP3 player market, rather than the position the iPhone holds in the smartphone market. In other words, the iPad can't simply be a leading product that fares well against the competition. It has to be a dominant product that leaves the competition in the dust. And there are plenty of competitors coming out of the woodwork, bent on seeing the iPad fail to reach the latter goal.

Where the competition stands
Of these competitors, Hewlett-Packard (NYSE: HPQ  ) has drawn the most attention with its upcoming Slate tablet. But to be honest, I think HP is the big-name challenger that Apple needs to worry least about right now: The Slate's limited battery life, and (more importantly) its use of Microsoft's (Nasdaq: MSFT  ) Windows 7 operating system rather than something more touchscreen-optimized, should doom it from the start to also-ran status.

On the other hand, Nokia's tablet plans, which were reported earlier this week by Rodman Renshaw analyst Ashok Kumar, could amount to something a little more competitive. Nokia will almost certainly eschew Windows 7 in favor of the Linux-based MeeGo operating system that it's working on with Intel (Nasdaq: INTC  ) , and its relationships with hundreds of wireless carriers around the world leave it in a great distribution and marketing position.

Likewise, Microsoft's planned Courier tablet, with its innovative dual-screen design and journal software, could carve out a niche with students and workers looking for a tablet to be a productivity device as much as an entertainment device. And while I think Google (Nasdaq: GOOG  ) has made a serious mistake by supporting its Chrome OS operating system as a tablet platform in addition to Android, there should still be some decent Android tablets on the market by the end of the year, especially with chip makers such as Broadcom (Nasdaq: BRCM  ) and Marvell Technology providing Android tablet reference designs.

How Apple needs to respond
To ground the competition before it can produce real momentum, Apple needs to quickly address the two issues that rivals are bound to try and hammer the company over: the iPad's lack of Adobe Flash support, and its high price tag due to a lack of carrier subsidies for 3G models. Already, I can see competitors running ads showing how their tablets can handle numerous Flash-based Web videos and games that, alas, the iPad can't. And I can already see carriers chomping at the bit to show how much cheaper one of their subsidized tablets is than any 3G iPad.

If Apple swallows its pride and changes its attitude toward Flash, and if it works out subsidy arrangements with AT&T (NYSE: T  ) and some major international carriers, the iPad might just smoke its competition. The device's strengths -- the iPhone OS, a huge app base, great battery life, and unrivaled mindshare -- could be enough to achieve iPod-like dominance. But the clock is definitely ticking.

Fool contributor Eric Jhonsa is breaking tennis racket strings at an alarming rate. He has no position in any of the companies mentioned. Intel, Microsoft, and Nokia are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers selection. Apple and Adobe Systems are Motley Fool Stock Advisor recommendations. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a buy calls position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (6)

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  • Report this Comment On April 08, 2010, at 4:23 PM, marv08 wrote:

    Well, there have been first reviews of the JooJoo, a Linux based device with a WebKit browser, a faster CPU than the iPad and Flash support... Flash video is not fluid and sucks the battery dry in 2.5 hrs! No way Jobs will allow that on the iPad and he is right. Flash is the worst, most insecure, most buggy and least energy efficient technology on the Internet - let it die already.

    AT&T offers the unlimited plan for the iPad at $30 without a contract because there is no subsidy. With a subsidy they would likely charge the same $60 on a mandatory contract everybody else is charging for data. The total price would be above $1.5k, while it is $499 plus data charges on demand now (means if you are on WiFi, you pay nothing). A subsidy does not make any sense here. Wait and see. Once the 3G model ships, Apple will market this accordingly and people will understand it. The cheapest plastic netbook from Verizon costs you more than the iPad, despite the subsidy.

  • Report this Comment On April 08, 2010, at 5:37 PM, l3iodeez wrote:

    marv08-

    You're right about Flash. And you're wrong that the iPad doesn't need it. Like copper landlines, fax machines and some other tech, it can remain the worst, most insecure, most buggy and least energy efficient technology and people will still keep using it because it is ubiquitous. I don't like dealing with faxes, but I have to because the business world expects it. In the same fashion the internet world expects Flash.

  • Report this Comment On April 08, 2010, at 7:12 PM, hportofino19 wrote:

    I purchased the 32gb wifi IPAD and a mobil wireless card with 4g network from Sprint which I know it's a better deal than the ATT 3G version coming out soon. Anyway, i take this Ipad everywhere with me and it truly rocks! I don't believe Nokia , HP or anyone else can compete with Apple...they are all going to crash like the Palm Pre did.....lololol

  • Report this Comment On April 08, 2010, at 8:00 PM, WaltFrench wrote:

    “Already, I can see competitors running ads showing how their tablets can handle numerous Flash-based Web videos and games…”

    Yeah, in your imagination.

    I have yet to find a SINGLE ultramobile / smartphone that runs stable, full, fluid Flash.

    Even the vaporware Flash 10.1 for the Nexus (“previewed” 3 months ago) is reported to suck the battery dry in time counted in minutes. And that's on a phone with more CPU and RAM than most any other new device. (More RAM than the Win7 phone, which won't support Flash. More CPU/RAM than the Palm, which is slow without Flash. Frinstance.)

    Somehow, Steve Jobs' intransigence has caused Nokia, Microsoft, RIM and Google to ALL FAIL in implementing Flash. Talk about the Reality Distortion Field at work!

    Or maybe you're thinking about a netbook with an Acorn running minimized Windows 7, not exactly the performance/Watt leader in most people's minds. As you say, not the Real Challenger.

    No, Apple is threatened by two phones that don't exist yet, from firms that haven't yet implemented Flash on phones. Come again?

    Seems as if Adobe has painted themselves into a corner with Flash, putting in features that just suck up too much juice for the mobile users.

  • Report this Comment On April 08, 2010, at 8:02 PM, plange01 wrote:

    ebay already fills with ipads...

  • Report this Comment On April 08, 2010, at 8:11 PM, WaltFrench wrote:

    “I can see competitors … showing … Flash-based Web videos and games…”

    Yeah, in your imagination. In today's world, I haven't found a SINGLE instance of an ultramobile computer or smartphone that runs Flash smoothly, reliably or securely.

    Closest is the Nexus, but Flash 10.1 on it is vaporware: “previewed” over 3 months ago and not for sale. The buzz is that even with Nexus's 2X faster CPU than most all phones and twice the RAM, Flash is … wait for it … a performance pig that eats batteries before breakfast.

    Surely you're not thinking of a design like the HP slate that you dismiss; the Acorn/Win7 combo has nobody excited about performance/Watt.

    You cite Apple's real threats as two devices from manufacturers who have never implemented decent Flash on a mobile browser, on operating systems that currently enjoy minimal Flash support, in a market that is consolidating, which will inevitably starve out second-tier firms for development resources on this very challenging issue.

    Looks like Adobe has painted itself into a corner by assuming ever-increasing CPU power, while users are increasingly demanding ever-more-mobile solutions. Apple didn't cause this problem, it's simply been rude enough (due to bad blood about other Apple/Adobe issues?) to point out the problem.

  • Report this Comment On April 08, 2010, at 8:24 PM, AlexanderAkhavan wrote:

    Call me crazy, but does anything think, Steve Jobs can convince Abode to make make software changes to Flash that he will accept it on an Ipad?

  • Report this Comment On April 09, 2010, at 12:47 AM, ConstableOdo wrote:

    The HP Slate will be practically dead on arrival. A full version of Windows 7 on an Atom is basically committing suicide. What is so different about the HP Slate than past Windows tablets. Besides, Windows geeks are so hung up on the practicality and cost of netbooks, so why should they pay more for a tablet that delivers less.

    It seems to me that Windows lapdogs would much prefer some convertible netbook with a keyboard and touch-screen and greater battery life. HP will be spitting into a gale force wind and will end up with saliva all over its face. You just can't teach old Windows lapdogs new tricks. It's not in their DNA. Only people with open minds can appreciate the iPad. Just look at the iPad as a simple media consumption device instead of some desktop computer squeezed into tablet size as lapdog Windows users are always looking for.

  • Report this Comment On April 09, 2010, at 10:19 AM, mikecart1 wrote:

    The current iPad will NOT dominate. I guarantee this more than anything else in my life. It is poorly designed, badly concepted, and is completely worthless in that it fits no unique customer base. Everything it can do, something else can do far better for cheaper.

    The iPad symbolizes everything you should NOT do when it comes to business planning and product modeling.

  • Report this Comment On April 09, 2010, at 1:36 PM, Turfscape wrote:

    mikecart1 wrote:

    "Everything it can do, something else can do far better for cheaper."

    Can you show me that product?

    mikecart1 wrote:

    "The iPad symbolizes everything you should NOT do when it comes to business planning and product modeling."

    First week sales numbers tend to disagree with you.

  • Report this Comment On April 09, 2010, at 2:35 PM, nipukumar wrote:

    A new true tablet pc has arrived indeed ! Microsoft started working on tablet pc as early as 2000 but could not shake the market. My take is iPAD will kill all internet notebook available today in market. HP,Acer need to rethink their "notebook" strategy. iPAD a internet notebook or tablet pc consumer will love.

  • Report this Comment On April 09, 2010, at 3:18 PM, mikecart1 wrote:

    Turfscape:

    Yes: iPhone + Laptop, Laptop, Kindle, iPod Touch. Funniest part of this is that half the products are their own HAHA. It is like Ford making a car with 200 HP and then making a car 3 years later with 140 HP with everything else the same or worse at a higher price HAHA.

    First week of sales for the worst movies usually do good also until word of mouth spreads and then that movie is on its way to Blockbuster if you know what I mean. :D

  • Report this Comment On April 09, 2010, at 6:30 PM, Turfscape wrote:

    mikecart1 wrote:

    "Yes: iPhone + Laptop, Laptop, Kindle, iPod Touch"

    Okay, so you'd like me to replace 1 iPad with 4 other devices? Hmmm....I think there's a space for iPad to do just fine in the market.

    Pardon me, I need to go watch AAPL shoot further up the ticker.

  • Report this Comment On April 09, 2010, at 11:20 PM, mikecart1 wrote:

    Sorry Turfscape to spoil your party, but AAPL is going to drop under $200 before this year is over. You heard it hear first.

  • Report this Comment On April 10, 2010, at 2:58 PM, Turfscape wrote:

    mikecart1 wrote:

    "Sorry Turfscape to spoil your party, but AAPL is going to drop under $200 before this year is over. You heard it hear first."

    Hmmm...sales are up. Market share is up. Revenues are up. Profits are up. Still holding a large cash hoard...yeah, good luck with that call.

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