This Might Be Google's Worst Idea Yet

If the rumors are to be believed -- and let's face it, when DigiTimes is involved, as it is here, they frequently shouldn't be -- Google (Nasdaq: GOOG  ) has cut a deal with ASUS to create a $199 tablet to compete with not just the iPad but also Amazon.com's (Nasdaq: AMZN  ) fast-selling Kindle Fire.

Fools might remember ASUS for an ambitious Frankentech project called the PadFone. The device that's a phone and a tablet that becomes a notebook PC uses the Ice Cream Sandwich edition of Google's Android operating system, among other advanced features.

More importantly, the tablet that doubles as a notebook screen is 10.1 inches -- or roughly the size of the screen that made the iPad attractive. By contrast, DigiTimes reports that an in-development cheapskate tab would include just 7 inches of screen space. From the article:

Google, in order to compete with Amazon, will cooperate with Asustek Computer to launch a 7-inch inexpensive tablet PC in May-June 2012 and this is expected to bring pressure of price cuts upon other vendors, including Acer, Lenovo, and Samsung Electronics, and in turn diminish gross margins for Taiwan-based supply chain makers, according to industry sources.

Please say it isn't so, Google. Consumers haven't taken to 7-inch tablets in the same way as larger alternatives. Don't take my word for it. Ask Dell (Nasdaq: DELL  ) and Research In Motion (Nasdaq: RIMM  ) about their experiences. Dell's Streak tab has twice failed to capture anyone's imagination, while RIM's shrimpy PlayBook took far too long to embed email and flopped as a result.

By contrast, Apple (Nasdaq: AAPL  ) sold more than 15 million 10-inch iPad 2 models in the fourth quarter and 3 million more units of its latest tablet during its first weekend on sale. My point? The 7-inch Fire is the exception rather than the rule. Why base an entire product and pricing strategy on an outlier, especially when Amazon, like Apple, has the benefit of bundling simple, cost-effective content access with its tablet?

You're better than this, Google. If you really want a seat at the tab table, work with your new hardware team to create a 10-inch tablet that embeds the new "Play" digital store in a friendly and intuitive way. Anything less would make for wasted capital.

Think I'm wrong? Go ahead and tell me so using the comments box underneath. Or if you'd rather spend more time investigating the rise of mobile computing, download this new Motley Fool special report: "The Next Trillion Dollar Revolution." The research is free, but only for a limited time. Get your copy now.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple, Google, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, and Apple, writing covered calls on Dell, and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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

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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 28, 2012, at 7:33 PM, joshpritchard wrote:

    You neglected to mention the 7" Kindle Fire and the Nook tablets, which both have had quite a bit more success than Dell and RIM's tablets. Admittedly, they haven't been nearly as successful as the iPad -- but even still seems odd to not mention the two most successful Android-based tablets, which also happen to be in the same 7" size.

  • Report this Comment On March 28, 2012, at 7:39 PM, winklerf wrote:

    There are two problems with your point of view. First, Asus also went from a backwater PC vendor to a major player by selling inexpensive netbooks. Second, the Kindle Fire is doing pretty well as an inexpensive 7" tablet.

    If you're going to try and build a presence in the tablet app market by racing to the bottom on hardware, Asus isn't a bad company to partner up with.

    The chance of following Amazon and getting the same result probably aren't good, but this isn't a bad strategy for buying market share.

  • Report this Comment On March 28, 2012, at 9:32 PM, westechm wrote:

    Google: great engineering, no creativity. They are doing what all iPad competitors are doing: trying to copy Apple's features, trying to compete on price, finding they can't compete on cost, cutting cutting, cutting to the point where it is not attractive to the consumer. The only way to compete successfully is to out think Apple and invent something new with its own panache. Copy-catting won't do it.

  • Report this Comment On March 28, 2012, at 9:40 PM, rlcato wrote:

    @joshpritchard:

    Read the 1st paragraph where he mentions the Kindle Fire -but not the Nook.

  • Report this Comment On April 01, 2012, at 4:14 PM, Alexa225 wrote:

    The beauty of a seven inch tablet is that it will fit nicely in a handbag and is book-sized - that's why I want one. Unfortunately, the Kindle Fire has not been made available in the UK and I don't like the look of the available seven inch tablets, so I'm waiting for the next generation.

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