Tablets: Computing's Latest Fad

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The lines started forming early for the iPad 2, bringing back fond memories of all those people camping out overnight to score the latest iteration of the iPhone. But while Apple (Nasdaq: AAPL  ) has proved itself the undisputed leader once again -- was anyone breaking out their sleeping bag for a Samsung Galaxy Tab? -- all this commotion about tablet computers may be much ado about nothing.

Padding its lead
Having brought to market the first truly functional and sleek tablet computer, Apple set the tone for other entrants into the space. The company generated so much buzz that the iPad became the must-have computing technology this past Christmas (with some Tabs tagging along for good measure). According the market research folks at IDC, 18 million tablets shipped worldwide in 2010, with 10.1 million shipped in the fourth quarter alone. And analysts think Apple could move 600,000 iPad 2s during the device's first days on sale.

Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) certainly felt the ground shift as analysts scrambled to rewrite their PC sales forecasts for coming-year sales. Earlier this month, Gartner slashed its estimates for PC unit growth to 10.5% from 12% (which was cut from almost 16% increases before) and lowered next year's estimates, too.

Much has also been made of Best Buy's (NYSE: BBY  ) Christmas miscues, despite its status as an Apple launch partner for the iPad. As the electronics retailer learned only too well, 3D and Internet-TV's were not the holidays' must-have upgrade.

Keeping tabs on the competition
Now everyone is plunging into the tablet market, from well-known manufacturers like Motorola Mobility (NYSE: MMI  ) to more obscure names like ZTE. Some 80 tablet models were announced leading up to the Consumer Electronics Show last month, and more will eventually come on line in the months ahead. From the headlines to the showrooms, it's all tabs, all the time.

So let me go out on a limb here and say that I think the mania sweeping the computing market is a bit overdone, and that any negative effect on PCs will be short-lived. Unless and until tablets become more powerful machines, consumers will be very disappointed.

"That's hot!"
Already, the  tech elite seem to be growing bored with the iPad and tablets, the buzz created by the iPad 2 notwithstanding. In articles in Time magazine and on Slate, as well as at other tech-centric websites like Business Insider's Silicon Alley Investor, tech geeks report that their tabs are collecting dust or serving as sleek beer mug coasters, rather than being used for computing. Many consider Apple's new MacBook Air a better, more bang-for-your-buck computing experience option.

The iPad has thus far been the entire tablet computer market, for all intents and purposes, and even with the proliferation of Android models, that doesn't seem to be changing soon. Estimates vary, but you can make a convincing case that Apple has a 90% share of the tablet market -- though that number drops when looking at shipments instead of sales to consumers.

Suffice to say that Samsung didn't have as nearly a smooth launch for its Galaxy Tab as Apple did for the iPad. And for all the accolades it won at the CES, sales of the Motorola Xoom have been, in a word, "underwhelming." Are we to expect that when Hewlett-Packard and Research In Motion (Nasdaq: RIMM  ) release their own tablets, they'll spark the imagination of consumers anymore than their predecessors?

Today's Palm Pilot
I'd hate to call tablet computers a fad, but right now, because Steve Jobs and Apple are out front on this, a lot of product is moving. Apple product, anyway. Apple fanatics will just about always glom onto a new product intro, and the fan sites will hype the heck out of it, which does cause ripples of enthusiasm out into the broader buying public.

Even plentiful tablet sales will wane before long, and laptop sales will return. That will leave analysts scrambling once again to upgrade their sales forecasts.

No high priest Vatican assassin warlocks
Tablet computers aren't the next pet rock, and they have more staying power than the Newton. But the PDA had a good run, too, before succumbing to smartphones. If even the tech geeks are tiring of their new Apple toys, and a sustainable market is having difficulty gaining traction with other manufacturers, tablet mania will have a shorter shelf life than Charlie Sheen's winning ways.

To stay ahead of any tablet news, add any of the companies above to The Motley Fool’s new My Watchlist service:

Best Buy and Microsoft are Motley Fool Inside Value choices. Apple and Best Buy are Motley Fool Stock Advisor selections. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Best Buy, and Microsoft. 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.

Fool contributor Rich Duprey owns shares of Motorola Mobility but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (6)

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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 14, 2011, at 4:22 PM, BabyGoat wrote:

    "When we were an agrarian nation, all cars were trucks, because that’s what you needed on the farm, but as vehicles started to be used in the urban centers, cars got more popular. Innovations like automatic transmission and power steering and things that you didn’t care about in a truck as much started to become paramount in cars….PCs are going to be like trucks. They’re still going to be around, they’re still going to have a lot of value, but they’re going to be used by one out of x people.”

    Steve Jobs

  • Report this Comment On March 14, 2011, at 4:29 PM, SkippyJohnJones wrote:

    I know this is an op-ed article, but on what do you base your assumption? To my eyes, this is setting up more like the iPod domination Apple has enjoyed for 10 years. You could fairly say that mp3 players not produced by Apple have failed, but the iPod itself is only now slowing down, having successfully reached ubiquity. The struggles of Galaxy Tab and Xoom don't necessarily have any bearing on future sales, except to discourage other would-be competitors from tablet R&D.

    Early adopters get bored easily, but aren't necessarily an indicator of broad adoption. Less than 1/4 of 1% of the world's population owns a tablet computer, so there is plenty of runway if these things don't take off right away. But all indications from last weekend's iPad2 event point to exponential growth. Tablets aren't for everyone, but unlike laptops they:

    - last all day on a charge

    - can be comfortably used in bed, on a plane, and on a couch

    - are location aware (GPS)

    - are cloud devices, with cellular radios that allow for constant connections

    - can be carried on without special airport screening

    - turn on instantly

    - are totally intuitive for non users to learn

    There are several other advantages, but my point isn't that tablets are superior. It is that tablets are DIFFERENT than PCs. Users can justify owning both devices, as the usage is different. I don't know that tablets are the next great technology wave, but I sure am not convinced otherwise based on your argument. You presented only two facts - the failure of iPad competitors and the fickle nature of "tech geeks." Please add some meat to this argument if you really feel strongly that tablets are going to flame out. Otherwise, it just looks like you are trolling for hits, writing to get negative feedback.

  • Report this Comment On March 14, 2011, at 4:34 PM, deemery wrote:

    >Today's Palm Pilot


    >Even plentiful tablet sales will wane before long, and laptop sales will return. That will leave analysts scrambling once again to upgrade their sales forecasts

    Here's a clue: The Palm Pilot is the direct parent of the smartphone. If Palm had been able to pull off something like the iPhone, they, rather than Apple would rule this market.

    So claims that people will dump pads and return to laptops is countered by this historical precedent. So go ahead and buy Microsoft and Dell, awaiting the "return of laptops". I'm sure these are the same analysts who were touting Microsoft and Sony, etc, when the iPod came out and Motorola and Nokia when the iPhone came out. So I don't doubt that analysts will continue to make dumb predictions (check out Fortune's "Apple 2.0" scorecard on how poorly these analysts track Apple stock, quarter after quarter after quarter....)

    One more clue: An estimated 75% of the sales of iPad 2 were to people who did not own an iPad 1.

  • Report this Comment On March 14, 2011, at 6:06 PM, Emperor2 wrote:

    Your post detailed the depth of your lack of understanding as to why your analysis is so flawed. You state, "tech geeks report that their tabs are collecting dust or serving as sleek beer mug coasters". Tech geeks aren't the ones buying iPads. It's everyday folks who love the ease of use of Apple products. Tech geeks want the latest "stuff". IPad, and Apple users in general, want to have their own "Easy" button (my apologies to Staples) and Apple gives it to them. Until Apples competitors start providing their own "Easy" button, they will continue to fall further and further behind Apple. Apple doesn't have the best products, from a technological standpoint, but they do have the easiest to use. Once people try an Apple product, Apple's ecosystem makes them realize that computing (in any form) can be very easy to do. Ask anyone with an iPad that has young children, "Do your kids use your iPad?". The answer will be yes and will be why Apple will have those children as future customers.

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