Is This Crucial Market Slipping Out of Apple's Hands?

The tablet market has long been synonymous with the Apple (Nasdaq: AAPL  ) iPad. Cupertino created the niche in 2010, filled it with aplomb as quarterly sales soared to 14 million units, and made a pretty penny along the way. Challengers rose, only to fall, one by one. Still standing amid the bloodbath, the iPad was the only product line that mattered.

But I had to use the past tense in that introduction, because things are changing -- fast.

The market analysts at IDC just published a report on global tablet sales in the third quarter. The market grew 50% year over year to 28 million units -- but Apple's market share is slipping.

Apple shifted 14 million iPad units this quarter, and the 26% growth rate fell far below the overall market. The biggest winners were Samsung, Asus, and Lenovo -- Android vendors, one and all. Asus' big winner was the Google (Nasdaq: GOOG  ) branded Nexus 7 and Lenovo is finding a respectable audience in China. (Nasdaq: AMZN  ) also sold 2.5 million Kindle Fire tablets, up from absolutely none a year earlier.

IDC notes, and I agree, that Apple won't stick to a pesky 50.4% market share forever. Cupertino fans held out for the just-released iPad Mini in the third quarter, thus shifting a few million expected unit sales into the holiday season. That's why the next quarterly update should return a few market share points to Apple's pocket.

On the other hand, Apple's rivals aren't resting on their growing pile of laurels. Google just introduced a new range of Nexus-branded tablets and smartphones. They were met with mixed reviews, but are priced to move -- the 7-inch version is $130 cheaper than the iPad Mini and the 10-inch model sells at the same $399 price point as Apple's budget-friendly but aging iPad 2.

One more thing
Then there's the new kid on the block. Microsoft (Nasdaq: MSFT  ) likes its brand-new Windows 8 software so much, it built its own tablet to run it. The Microsoft Surface tablet undercuts the latest full-size iPad in manufacturing costs but is priced right alongside Apple's tablets. Microsoft CEO Steve Ballmer insists that nobody has a tablet worthy of shining the Surface's shoes: "Not Apple. Not Google. Not Amazon. Nobody has a product that lets you work and play that can be your tablet and your PC. Not at any price point."

So he's betting on strong sales at any price, and the Surface will be very profitable if the bet pays off. If not, well, Apple has seen plenty of rivals slashing tablet prices until they sell. But by then, there's usually no profit at all left in the usurper's business model. Let's see if Microsoft can avoid that grim fate.

Finally, Research In Motion (Nasdaq: RIMM  ) is working up a whole new experience for BlackBerry fans -- but the refresh to BlackBerry 10 is still many moons away. RIM will miss the crucial holiday season, and it's awfully tough to start a new high-tech product line from scratch in a season where Valentine's Day is the biggest gift-swapping holiday. Somehow I doubt that BB10 will smell like roses and chocolate.

The tablet market is evolving, and Apple must be quick on its feet to stay relevant during this sea change.

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  • Report this Comment On November 06, 2012, at 6:36 PM, gfbjohn wrote:

    S Ballmer needs to get off his high horse. If he expects folks to flock to W8/Surface, MS needs to nearly give them away to start. As the momentum builds *then* bump the price up to match the iPad. Sometimes the more you pay, the more it's worth but I'm not going buy the late comer Surface when at the same price I can get the iPad market leader, which is number one because it has been demonstrably the best.

  • Report this Comment On November 06, 2012, at 7:55 PM, Melci wrote:

    Of course the tablet market is not slipping out of Apple's hands.

    Despite being half the price of the iPad, the Nexus 7 only sold 500,000 during its launch month, 6-700,000 the following month and less than a million the last month of the quarter according to Asus, the manufacturer. The Kindle Fire likewise only sold as small a number as the nexus.

    This compares to the iPad which sold 3 million in 3 days last week.

    "Priced to move"? You mean priced to decimate the rest of the Android tablet market as other OEMs have the knife twisted in their back by Google and Amazon selling below cost and thus destroying any chance other Android manufacturers had of making money on tablets without some other commodity to make up for the losses.

    And Samsung? Court documents reveal they sold a measly 37,000 tablets in the USA in Q2 2012 showing the lie behind the grossly inflated figures trumpeted by IDC of 2.5 million that same quarter.

    The iPad has sat at 60-70% marketshare for the last 20 months and IDC's artificial pre-iPad mini launch dip last quarter is purely a blip as iPads continue to fly off the shelves in record numbers.

    The iPad's 91% web share as reported by Strategy analytics and 98.1% web share as reported by OnSwipe not to mention the 90% e-commerce marketshare reported by Rich Relevance and the 97.3% business tablet activations reported by Good Technology all point to the true level of market dominance Apple continues to achieve with the iPad.

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