1 More Reason for Apple to Worry

The outlook isn't getting any rosier for Apple (Nasdaq: AAPL  ) in the tablet space.

This morning Sterne Agee's Shaw Wu became the latest analyst to slash his target for iPad 2 sales this holiday quarter. Wu now sees Apple moving just 13.5 million tablets this quarter, below the 15 million iPads that he was previously modeling.

None of the analysts talking down the iPad prospects are turning bearish on Apple. If anything, the same channel checks that are making them worry about the iPad 2 sales are actually showing better-than-expected iPhone sales.

However, it's clear that this holiday season is going to be a challenging one for Apple when it comes to the iPad 2. It will remain the undisputed leader in tablet sales, but last month's arrival of Amazon.com's (Nasdaq: AMZN  ) Kindle Fire and the fire sales for Hewlett-Packard (NYSE: HPQ  ) TouchPads and Research In Motion (Nasdaq: RIMM  ) PlayBooks will find Santa cutting corners this month.

Will things get any easier next season? HP and RIM will likely be long gone from this space, but Amazon is in this for the long haul.

Apple may also face some competition from -- don't laugh -- Microsoft (Nasdaq: MSFT  ) .

The tablet-friendly Windows 8 operating system hits the market next year, and yesterday the world's largest software company revealed details of its App Store knockoff, Windows Store. The plan there is to give successful developers a bigger cut of high-volume releases than Apple does.

This in and of itself doesn't mean that developers will drop what they're doing on the iOS front to support Windows 8. However, if Windows 8 tablets take off -- and there's a decent chance that they will since Windows remains the desktop and laptop operating system for the masses -- application coders will have to pay as much attention to Windows as they do to iOS and Android.

It will be difficult for Windows 8 tablets to compete on price the way that Android tablets have finally learned to do. However, remember when folks said that developers would never leave iOS to support Android? Well, Google (Nasdaq: GOOG  ) announced yesterday that it's serving up a billion Android apps a month now, which -- as AllThingsD's John Paczkowski points out -- is in line with Apple's App Store performance.

Android's success has been almost exclusively on the smartphone end, but clearly the major appeal for last year's iPad rollout was that consumers were already familiar with iOS apps through their iPhones and iPod touch devices. Android's booming popularity as a platform and the possibility of Microsoft rising from the dead next year will make next year's holiday season even more challenging for what is quickly evolving into the mispriced iPad.

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The Motley Fool owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, Amazon.com, and Apple. Motley Fool newsletter services have also recommended creating bull call spread positions in Microsoft and Apple. 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. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for HP. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (5)

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  • Report this Comment On December 07, 2011, at 2:31 PM, artlaz wrote:

    Calling the iPad 2 "mispriced" is foolish. The comparable tablets - meaning comparable in size and features - are all base-priced around $500. The ones selling for $200 or less are either marketplace failures or less than half the size and/or clearance items, or small, stripped down loss-leaders (Kindle Fire) with limited utility. How "mispriced" could it be if it will still sell the majority of all tablets sold this quarter?

  • Report this Comment On December 07, 2011, at 2:49 PM, SimchaStein wrote:

    "Slashed forecast" ? Last quarter 11.1 ipads. So 13.5 means 17.4% growth Qtr/Qtr. At that rate unit shipments will not quite double in one year. Is this a reason to worry?

    "Mispriced"? Hmm, Yup they'll have truly competitive products at lower price, soon. But iPad3 will raise the bar, again, soon.

    Disclosure - long and fanboy

  • Report this Comment On December 07, 2011, at 3:59 PM, hellomojo wrote:

    iPad is probably selling now more in line with what Apple envisioned to start with. When it was introduced Apple was shocked at the demand; then analyst went crazy, as usual, pulling outrageous sales #'s out of their arse. I expect its sales will grow at reasonable pace and they will continue to hold a large percentage of market share for years to come. It will be interesting to see how the Fire will fare once the initial holiday rush of sales is done and people get their hands on it.

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