The Subtle Secret to Tablet Triumph

Challengers to the Apple (Nasdaq: AAPL  ) iPad keep on coming, like waves of infantry in the trenches of World War I. True to that analogy, those would-be iPad killers are easily cut down by Apple's fortified machine guns. Cupertino's trenches are holding up just fine; in fact, the company keeps executing a Somme Offensive of sorts.

Will other tablet makers ever figure out how to make a dent in Apple's stalwart forces? They just might, if the gadget builders are wiling to learn something from their early losses.

No, really, please take it
Take the Hewlett-Packard (NYSE: HPQ  ) TouchPad. Powered by the webOS software that made Palm worth $1.2 billion in HP's white-knight rescue raid, the tablet never found an audience. That is, until HP slashed prices to the bone, cleaning out unsold inventories in a flash and even sparking calls for another production run. As it turns out, a $99 tablet will sell even if the platform has one foot in the grave.

Research In Motion (Nasdaq: RIMM  ) saw HP's grand experiment in price-cutting as a model to follow. Lacking an email and messaging solution unless you tethered the poor thing to a smartphone, the BlackBerry PlayBook largely failed to do what BlackBerries are supposed to be good at. But at $199 a pop, even this stillborn device rolled off store shelves.

And Amazon.com (Nasdaq: AMZN  ) took this trend to heart. The Kindle Fire isn't the fastest, strongest, or smartest tablet on the market. It's smaller than an iPad, it doesn't have a camera, and it sure can't leap tall buildings in a single bound. But it's priced to move at $199. And it's moving by the millions.

We never learn anything from history
Other tablet makers have started to see this obvious lesson by now: You don't really have to have the best gadget on the market, as long as the thing is cheap enough. I mean, why do we buy tablets at all? They're always less capable than a full-fledged notebook or even netbook computer. The portability advantage over netbooks is pretty small, and it disappears completely next to your favorite smartphone model. But if it's a handy combination of power, portability, and price, we'll buy it. And I'd argue that price is the most important of these three Ps.

The 7-inch HTC Flyer tablet got a price cut from $499 to $299, or $240 if you want the Sprint Nextel (NYSE: S  ) version. It helps if the distributor is willing to take some of the pricing pain with subsidies like this one. Sony is chopping about $100 off each of its Tablet S models. These cuts may not be deep enough, but they are certainly steps in the right direction.

The iPad remains the only tablet that gets a price premium thanks to design, features, or brand reputation. No matter how much it stings an already bruised corporate ego, rivals need to accept this simple fact and start a scorched-earth campaign if they want any part of the tablet market at all.

Even then, Apple will keep the lion's share of tablet profits for years to come. Beyond that, it's not easy picking winners in the tablet wars. But you could bypass the Maginot line under construction by looking deeper into the devices themselves. Check out these terrific tablet-focused ideas in the semiconductor industry, for example. You don't really have to pick a winner to come out ahead.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. Our disclosure policy quietly assumes that this first World War in tablets will be followed by the second, third, and 28th global conflicts.


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