5 Losers From the New iPad

Nearly everyone is gushing about Apple's (Nasdaq: AAPL  ) new iPad. The evolutionary iPad 2, hitting the market just 11 months after the revolutionary iPad, will be huge for Apple -- and a headache for nearly everybody else.

The following five companies have plenty to lose from iPad 2's March 11 arrival:

ZAGG (Nasdaq: ZAGG  )
Shares of ZAGG fell 24% yesterday, making it the biggest percentage loser on Apple news. Perhaps after a bit of deep breathing, investors calmed down and pushed the stock back 18% in today's trading.

Apple introduced the Smart Cover, a clever protective wrap that snaps into place magnetically on the iPad 2. It also doubles as a stand, and it's available in 10 different colors.  

This is problematic for ZAGG. The company has carved a cozy living out of selling covers, screen protectors, and other accessories for Apple gadgetry. Apple has been pretty bland about its accessories in the past, giving ZAGG and other third-party opportunists a crack at outfitting Apple fans with stylish and functional add-ons. The Smart Cover is both edgy and full-featured. If it's a hit -- and it will be -- expect Apple to add similar pizzazz to future accessories.

Motorola Mobility (NYSE: MMI  )
Motorola Mobility's stock took a 4% hit yesterday. Xoom -- the first tablet running Google's (Nasdaq: GOOG  ) tablet-specific Android 3.0 Honeycomb operating system -- seemed like a legitimate threat to Apple earlier this year. Even after Motorola Mobility revealed that it wouldn't come in at a lower price point than the iPad, its killer spec sheet still turned heads.

Dual cameras became one of Xoom's major selling points: a front-facing camera for videoconferencing, and a rear-facing one that shoots high-def video in 720p. Everyone expected iPad 2 to at least add a front-facing video camera, making the most of Apple's FaceTime videoconferencing platform. But as it turns out, the iPad 2 also has a rear-facing camera shooting in (you guessed it) high-def 720p.

There are still some neat hardware whistles on the Xoom, and software selling points for Honeycomb, but the iPad 2 may be enough to drown them out.

Seagate (Nasdaq: STX  )
Hard drive makers gained ground yesterday, even though an iSuppli report warned of a sequential decline in shipments. The shift to tablet and smartphone computing is obviously hurting hard drive companies, since smaller gadgetry leans on flash storage instead of drive makers' traditional magnetic platters.

The arrival of the iPad 2 will force tablet makers to up their game, making their upcoming devices more functional. You hear that, laptops?

In fairness, all of these slim, portable flash-memory-packing devices won't necessarily sound the death knell for hard drives. We'll still need server storage to keep the Internet humming along. Nonetheless, the shift could prove troublesome for hard drive makers and investors alike.

Research In Motion (Nasdaq: RIMM  )
Apple's customers expect annual refreshes to the company's iProducts, so rival tablet makers probably didn't expect the iPad 2 to hit the market as early as next week. Now that the U.S. March 11 launch date is official, where does that leave RIM's PlayBook?

The BlackBerry giant is aiming for an entirely different market than Apple's fan base, but it has to hurt to be rolling out this late. Apple has already sold 15 million iPads. Who knows how many iPad 2s it will move on top of that before RIM ships its first tablet?

Cisco (Nasdaq: CSCO  )
Rather than go through all of the other tablet makers that are as late to the party as RIM, let me name the networking giant as this list's final loser.

The iPad 2's dual cameras and FaceTime functionality hit Cisco below the belt in two different places. First we have Cisco's line of Flip cameras. Incorporating a camera into the latest generation of iPod touch was a bigger affront to Flip's product line, but it'll be an even harder sell when tablets can also shoot high-def video in a pinch.

There's also Umi Telepresence, enterprise-centric Cisco's first push into consumer videoconferencing. Between FaceTime and the iPad 2's long overdue addition of HDMI video mirroring (with a $39 adapter), Umi seems overpriced and out of touch.

Which of these five companies do you think will be the biggest loser? Can you think of more? Share your thoughts in the comment box below.

Google is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor pick. The Fool has written puts on Apple. The Fool has created a bull call spread position on Cisco Systems. The Fool owns shares of Apple, and Google. Motley Fool Alpha owns shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has an original iPad, but he may be tempted to stray this year. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (10)

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 March 03, 2011, at 5:58 PM, havoc007 wrote:

    Nice article. However you failed to add 1 plus 1.

    Lets review, the tablets give millions of people to capture Hi-def video (megs/gigs of storage, not just a photo or mp3). The last time I checked laptops/desktops were not being used in the streets to capture hi-def video. The general user will capture hi-def video and offload it onto their system at home (hard drive) in order to perform minor video editing (captions/splicing/etc). They will back up this video onto an external USB hard drive for safe keeping. They will of course want to share this, so they send it to the 'Cloud', such as YouTube/Facebook/etc which requires large data centers (99.9% of all datacenters use hard drives). NOTE: Hard drive manufacturers make more money when consumers use Cloud storage instead of laptop/desktop storage - drives sold to data centers carry higher margins, than if they were sold to PC oems. These data centers will then perform backups of the primary systems to other hard drive based systems. On top of this they will create running snapshots perhaps on an hourly basis, in order to efficiently recover from a critical outage (virus/hackers/power/etc). This requires even more hard drive storage. Hey wait were not done yet, these sites will then replicate the data systems geographically across the world to over come bandwidth/hotspot issues. Once again requiring more hard drive based storage. Then on top of that the whole world will have access to this hi-def video and may decide to download the video to its local desktop/laptop... yes requiring more hard drive storage.

    To recap, although these tablets may not currently have a hard drive, the hi-def content that these tablets will be creating, will eventually require 7-10 hard drives. Storage industry growth as measured by total bytes is growing exponentially. These tablet will fuel the growth even more.

    Companies that will benefit the most from tablets are: EMC/NTAP/WDC/STX/CSCO (Cisco is mentioned, because we will need to netwrk to transfer all that data)

    regards

  • Report this Comment On March 03, 2011, at 9:04 PM, RickVBAGuy wrote:

    Take note, the RIM Playbook expects to ship April 10.

    http://www.xbitlabs.com/news/mobile/display/20110302230850_R...

  • Report this Comment On March 04, 2011, at 4:28 AM, FoolDiligence wrote:

    I am going to disagree that RIM is a loser because of the iPad2 (Hear me out).

    RIM has not sold any tablets, their current market share here is still zero. Furthermore, RIMM stock is priced for zero growth and zero Playbook sales anyways.

    More importantly though, I am not aware that the first iPad made any significant dent into the Playbook's target - the enterprise. I do not feel that the iPad2 is any different in appealing to this market.

    The iPad2 still does not have true multi-tasking capabilities or Flash support. It also only has 256MB of RAM and 720p video, where the Playbook has 1GB of RAM and 1080p video.

    That being said, Apple will continue to be successful and they will make boat loads of money. The iPad2 is going to be very popular and Apple will sell a lot of them, I just don't think that RIM is a loser because of it.

  • Report this Comment On March 04, 2011, at 9:50 AM, GrumpyOldHepcat wrote:

    @havoc007 makes a good point, but I'm not sure if tablets are really content-generating devices. Since they _are_ heavy content-consuming bandwidth-hungry devices, I think that we are looking at needing new WiFi standards in the next few years. These new WiFi standards will need to hand a much larger number of simultaneous high-bandwidth connections.

    @FoolDiligence is wrong, I believe, about the iPad in enterprise. Many organizations are adopting or testing iPad solutions. So, I think RIM is in more trouble than the even Doom-and-Gloom crowd think. RIM built its business by being the first to provide secure mobile access to enterprise e-mail. They established a dominant position which was protected by organizational inertia that make IT departments loath to switch platforms.

    RIM was not the first mover in enterprise tablet solutions and so they have allowed other products into their domain. This is a problem. RIM can recover if they can ship Tablets that can meet enterprise needs.

    I see two significant stumbling blocks.

    RIM's tablets need to have at least 8 bona fide hours of battery life so they don't need to be charged during a normal work day.

    RIM must also deliver Apps that these organizations want.

    If RIM cannot keep other players out of enterprise tablets, their lock on mobile enterprise email will likely also erode. I don't know if Apple will be the big winner there, but it's not a good position for RIM.

  • Report this Comment On March 04, 2011, at 12:10 PM, kwill10 wrote:

    An interesting twist for MMI is that rumors are surfacing of a 32 GB Xoom Wi-Fi only model for $539 available in April, cheaper than the equivalent iPad ($599). The Xoom still stacks up well against the iPad 2 in my opinion; if Xoom really beats on price, there's may be a legit contender to iPad here. I personally have looked at iPads but have been frustrated by some of the things they don't do; I'm going to be taking a hard look at the Xoom now.

  • Report this Comment On March 04, 2011, at 3:53 PM, plange01 wrote:

    mmi is extremely oversold at its current price...

  • Report this Comment On March 09, 2011, at 3:13 AM, FoolDiligence wrote:

    @GrumpyOldHepcat

    RIM is already priced at depressed levels, and was so before any announcement of the iPad2. RIM is still priced as though their 2012 Playbook sales will be equal to their 2010 Playbook sales. How could they be in even more trouble than doom-and-gloom?

    You said that IT departments loathe switching, but then point out that ‘many organizations (reports suggest 80% of Fortune 100) are adopting or testing iPad solutions’. How many have already adopted and how many are testing? And what is testing? Did the company buy a single iPad for the IT manager to fool around with before he gave it to his kid as a present?

    Is every single IT department going to do something they loathe?

    Very happy to finish in 3rd for a share of a pie that is expected to grow by at least five times over the next few years - especially at these prices.

    Long RIM, AAPL

  • Report this Comment On March 11, 2011, at 7:52 PM, mike2153 wrote:

    I'm disappointed in MMI. It's down almost $8.00 a share from its price at the Motorola split up. I was hoping to see more of a boost from the XOOM phone. If it doesn't pick fairly soon, I'll be ready to get out and put my money somewhere else.

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