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Finally, iPad Competitors Emerge

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Apple  (Nasdaq: AAPL  )  not only straddles the burgeoning tablet and smartphone markets but also holds sway across the computer, home-entertainment, and media fields. The moves it makes can affect the future of hundreds of companies. With that in mind, we're taking a look at the week in Apple news, to see how its latest activity influences the Cupertino giant, its suppliers, and even its competitors.

Tablet competitors on the starboard!
After the relative tranquility of seven months alone on the market, the iPad is finally getting some competition. Earlier this week, BlackBerry-maker Research In Motion (Nasdaq: RIMM  ) announced that its PlayBook tablet would be priced at sub-$500 levels upon its release early next year. Even though Apple's known for selling premium-priced products, competitors have had a difficult time matching the $500 price point Apple established with its entry-level iPad.

While Samsung's entry into the tablet field can be purchased for $400 from Sprint (NYSE: S  ) , that price includes a two year data-plan contract. Customers wishing to buy the tablet without a contract have to pay a steeper $600 price tag. Apple has openly admitted that its future gross margins will decline because of aggressive pricing on newer "innovative" products.

That's a cagey move on Apple's part. The company has notoriously held firm on product simplicity -- such as releasing only one iPhone model -- but Apple released a Wi-Fi and 3G model of its iPad. Thanks to that move, consumers anchor to the entry-level price of the $500 Wi-Fi-only model of the iPad when in reality they tend to buy the more expensive models. Last quarter, the average iPad selling price was $645, above the price of the entry level 3G-model.

With Gartner projecting sales of tablets growing from 19.5 million this year to 208 million in 2014, Apple's decision to forgo profits now to establish a stronger leadership position should pay off. Apple's current 95% market share won't last long, but if it captures a comparable market share to what the iPhone currently sees in smartphones, that'd leave Apple positioned for 35 million iPads sold in 2014 if Gartner's tablet projections prove correct. At today's selling prices, the iPad would be contributing $22 billion a year in sales to Apple. That's more sales than Dell's (Nasdaq: DELL  ) entire low-margin business generates in an entire year!

Then again, we're still early in the tablet-hype cycle, so don't take industry future sales guestimates as gospel yet.

Read all about fellow Fool Rick Munarriz's take on a recent iPad competitor's not-quite-true tales of success.

The biggest Apple news you'll ever see! Or not …
Apple titillated the masses this week with a teaser of huge iTunes news. In the end, the announcement was relatively mundane: Britain's Fab Four, The Beatles, would finally be coming to iTunes. This is pretty immaterial news for a company spinning out $20 billion in sales a quarter, but all the speculation over the announcement did highlight iTunes' deficiencies in several key areas.

The most glaring omission from iTunes is its lack of cloud-based streaming or music-storing options. Google (Nasdaq: GOOG  ) has plans of its own for a "Google Music" service that will (as with all things Google) be heavily Web-based. A Google Music service would help alleviate one of the biggest weaknesses with Android: the lack of a central media manager like iTunes to accompany its mobile operating system. Apple's purchase of tiny LaLa a year ago gave the company a team of experts with experience building a streaming music platform, but Jobs & Co. seem content to hold back on a major iTunes revision until it's perfected to Apple's exacting standards.

NVIDIA gets back in the high end
Although AMD (NYSE: AMD  ) displaced NVIDIA (Nasdaq: NVDA  ) as the graphics-card supplier on the recent MacBook Pro refresh, that hasn't stopped NVIDIA from targeting upgraders at the top end of the market. NVIDIA announced the availability of its $1,200 Quadro 4000 card for Mac Pro users looking for a little more graphics firepower.

Although graphics cards are synonymous with video games, they're also essential for power users of photo and video editing and 3D modeling programs. NVIDIA has a strong advantage in that certain features of Adobe's industry-standard Premiere suite work only on NVIDIA processors. Meanwhile, even though NVIDIA lost out on its desktop presence on Apple machines, the company scored on Apple's new MacBook Air. The cheaper cards seen in laptops don't provide nearly the revenue (or margins) of higher-end desktop cards, but NVIDIA investors have to take some solace with that recent win. But graphics-card dominance shifts back and forth quickly in certain segments, so AMD's continuing desktop dominance is hardly assured.

That's it for this week's Apple news. If you're searching for other opportunities in the mobile world, we've created a special report featuring a mobile giant that The Motley Fool has put its own money behind. Click here to get instant access to this report right now.

Eric Bleeker owns shares of NVIDIA. Google is a recommendation of Motley Fool Inside Value and Motley Fool Rule Breakers. Apple and NVIDIA are Motley Fool Stock Advisor picks. The Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 21, 2010, at 5:09 PM, TEBuddy wrote:

    The ONLY reason Nvidia is in the Macbook Air has nothing do with AMD, but Intel's graphics shortfalls. Apple uses Intel processors and the Air uses integrated graphics, not discrete. So Apple decided to stick with Intel cpus, but not Intel GPUs, optining for the only other chipset maker for Intel cpus which is Nvidia and their IGPs which are way better than Intel. Match it up against an AMD IGP and Nvidia would have no performance edge there. If the AMD fusion APUs were on the street already then the MacBook Air would probably be all AMD. I cannot fault Apple for choosing Intel notebook CPUs because the ones already available consume less power than AMD's. However that will change with the AMD Fusion products.

  • Report this Comment On November 21, 2010, at 8:53 PM, austintexasit wrote:

    I think you've looked past the less obvious. Coming out in the next 4 weeks, for under $300.00 is the Archos 10.1" tablet, with a 1024x600 screen, and Android 2.2. It can be pre-ordered on Amazon or for more information check out the specs on the Archos web site.

  • Report this Comment On November 22, 2010, at 12:47 AM, IAO1985 wrote:

    Ok, Apple does have great products and awesome brand recognition, but doesn’t mean they don’t have competition. Apple biggest disadvantage is that every time it comes out with a new product everyone soon follows with similar products and price wars will surely follow. When it comes to tablets Apple will have the niche when it comes in everyday consumers, but I believe Cisco's Cuis will take over the business world and the classroom. Apple seemed like they have ignore the two biggest markets, Companies and Government, and because of this and future competition you will begin to see Apple’s margins decrease over the next several years.

  • Report this Comment On November 22, 2010, at 11:49 AM, AndroidPads4All wrote:

    All of my friends who bought the Ipad is already bored with it. They used it for one or two weeks, then you don't hear about it again. They already put it down. Now I am pretty sure they will opt to buy the next one thats coming out. I, on the other hand, always go for the competition and look for ways to make them better. It doesn't make sense buying an expensive Ipad and not know how to utilize all of it's functions. To me, Android tablets will be a better choice especially with the technology being developed. A lot Android Tablets are out there than we realize, just can't wait for the new software and apps that will be made specifically for the larger screens. See more android tablets at android-pads dot com.

  • Report this Comment On November 22, 2010, at 3:39 PM, tharbold wrote:

    I have trouble comparing the iPad to laptops or netbooks and view the devices much more like smartphones. It seems to me that the sweet spot for these devices rests in their ability to provide one with fairly pervasive, mobile and immediate access to rich content. All of that being said, I believe that within the next year the device will pretty much be a commodity (whether an iPad, Galaxy Tab, Streak or other), and the bigger determining factor will be what kind of data plan or service you can get for any given device. Sooner or later, the cost of 3G or 4G coverage will become more important to the consumer than the cost of the actual device.

    A current example of this is the Galaxy Tab, Verizon's data plans for the GT are rather expensive with a monthly limit, overage charger per GB of data and additional fees if you want to use text messaging from the GT. Compare that to what I find to be a better deal, the rather simple $25/mth 1 GB all-inclusive price for the iPad data plan from AT&T - no overages, just start your next 30 day/1GB window if you run out of data - thought the iPad doesn't really support text messaging.

    Random Thoughts:

    1) Yes, I have an iPad I've used for about a year.

    2) I live and die by an Android smartphone.

    3) The iPad hasn't 'worn off' - I still use it daily.

    4) Finally - I'd happily trade the iPad for a Galaxy Tab if only the data plan pricing wasn't so much worse.

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