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The big screen in our family room rarely comes on anymore.
You'd think that would be a good thing. And it would be, if it meant our three kids were out in the yard playing or riding bikes, or perhaps reading a new novel. More often they're watching TV or playing video games on their iPads.
As a parent, I find their habit troubling. As an investor, I believe tablets will be the next generation's dominant form of computing. I'll have three ideas for how to profit from the shift by the end of this article. First, let's talk a bit more about why tablets resonate so well.
A history of tablet use (and abuse)
Our oldest bought an iPad 2 more than a year ago. The younger two got theirs -- an iPad 2 for our daughter, a Mini for our youngest son -- for Christmas. Ever since, it's been tough to pry them away. They like watching TV and Internet video far too much. And why not? For them, TV isn't a device. It's just software.
You can imagine what I think of this as a parent. Passive media that goes everywhere? No, thanks. I'd much rather they read, play, and create than merely consume.
Here's the problem: I'm the one who taught my kids that a tablet could make for an awesome TV.
Shortly after I received a Samsung Galaxy Tab 10.1 for attending Google's 2010 developer conference, I experimented with ways to turn it into a TV. Netflix didn't comply at first, nor did Amazon.com, as both companies struggled to stay current with differing versions of the Android operating system. Only YouTube worked as advertised.
Meanwhile, my wife became accustomed to taking her first-generation iPad on the treadmill. Netflix worked perfectly for streaming Mad Men, while HBO2GO offered its own set of compelling alternatives. She even tried Hulu Plus for a time, at my urging, to entertain our then-Kindergarten age son while waiting in the school pickup line for his older siblings.
Thus, if there's anyone to blame for our kids' iPad addiction, it's this guy (two thumbs, pointed inward).
I find myself intrigued by how quickly my kids have taken to "apps" as tools for embellishing their lives. My kids are aware of and attuned to software in ways I never was growing up.
Welcome to the new world of apps
Apps are more like pills than chunky software programs like Microsoft's Word. They stimulate, satisfying a distinct and easily identifiable need in a short burst of code.
Want to know more about your surroundings? Take the Google Earth pill. The app will tell you not only where you are but also what's around you and show maps you've saved for later use. Want to check in on breaking news? Take the Twitter pill. Want to watch cats make crazy faces? Try the YouTube pill. And on it goes. Whatever you think you need, chances are there's an app designed to fill it.
In this sense, a recent Nielsen study that found that 85% of tablet owners use their devices while watching TV at least once a month isn't all that surprising. Tablets gain function through apps, and apps are rarely self-contained.
Nielsen has no data on this (at least as far I know), but I'd bet the app-as-stimulant model goes well beyond TV. Think of exercise apps. Aren't they, too, just little code pills designed to focus on you on a particular training regimen, or tell you more about where you're running, or monitor your condition to ensure that you don't get hurt?
3 stocks poised to profit from our digital pill-popping
We're moving -- inevitably, I think -- toward a world in which tablets offer butler-like service on demand via apps. How can we profit from that? One obvious answer is to invest in the underlying platforms that host apps, notably Apple with iOS and Google with Android.
But obvious winners are also obvious for a reason: Wall Street already knows about them, which makes it harder to eke out profits owning these behemoths. Lesser known stocks don't suffer that stigma. Here, as promised, are three companies working to make tablets more functional and, in turn, create opportunities for app developers to do more:
1. NVIDIA (NASDAQ: NVDA ) . The chipmaker has a long history in gaming, so it knows how to cater to power users. Tablet owners may also be familiar with NVIDIA's Tegra chipset, which the company claims to be the world's fastest mobile processor. A forthcoming quad-core chip with an optional LTE radio could help the next round of Android tablets set speed records.
2. InvenSense (NYSE: INVN ) . This little-known Israeli operator has a wide-ranging portfolio of motion-sensing technology capable of enhancing everything from gaming to navigation to photography to device control. Does that mean we'll see more motion-sensitive tablets on the market? InvenSense's technology already works natively with ARM Holdings' (NASDAQ: ARMH ) mobile chip designs, several implementations of which have proven popular in tablets. I think it's just a matter of time.
3. Nuance Communications (NASDAQ: NUAN ) . The company best known for creating dictation software for PCs and Macs is working on a voice-activated assistant that travels from your phone, to your tablet, to your car. Imagine a smarter Siri that knows not only how to add an appointment to your calendar but also how to pause Netflix, pay a bill, or act as a universal translator when traveling overseas. Nuance could supply the technology for all this and more.
We like to talk as if tablets are a someday product that'll recalibrate how we use PCs. The truth is much bigger than that: The iPad and its peers have already changed how we use not only PCs, but also TV and gaming consoles. And we have our kids to thank for it.
Are you using a tablet? Have you become addicted? If so, to what apps and why? Please weigh in using the comments box below.
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