A more capable iPad could expand Apple's (NASDAQ: AAPL ) total addressable market by tens of millions of units, says Barclay's Ben Reitzes. The technology is here, and the timing makes sense, Reitzes says, for a larger iPad.
Evidence in the A7
Reitzes argument for a larger iPad is largely derived from Apple's new A7.
With the launch of the iPhone 5s, Apple introduced its A7 system on a chip, or SoC, with an ARM Holdings based 64-bit architecture. As the world's first 64-bit SoC to debut on a smartphone, Apple's decision to adopt the architecture initially caused quite a ruckus. Even Qualcomm Chief Operating Officer Anand Chandrasekher chimed in, calling the chip's 64-bit architecture a "marketing gimmick," claiming that there is "zero benefit" to the consumer. SoC critics argue that the architecture is only for memory addressability beyond 4GB, and the iPhone 5s only has 1GM of DRAM, rendering the technology useless.
But as time goes on, the tech world seems to be warming up to the idea of a 64-bit smartphone. In fact, Qualcomm has retracted Chandrasekher's statements, calling them inaccurate. "The mobile hardware and software ecosystem is already moving in the direction of 64-bit; and, the evolution to 64-bit brings desktop class capabilities and user experiences to mobile, as well as enabling mobile processors and software to run new classes of computing devices," a Qualcomm spokesperson told Macworld. If the mobile hardware and software ecosystem really is moving in the direction of 64-bit, then Apple may simply be one step ahead of the game; the technology sets the stage for developers to begin optimizing apps for 64-bit architecture before a device that demands the technology arrives.
What type of device may require 64-bit architecture? Why, a 13" iPad, Reitzes argues. His argument makes a lot of sense:
We believe that Apple is seeding its iOS install base for a real second run at the PC market with an iPad/Convertible type product that does what the Surface was supposed to do. If accurate, this product should include a 64-bit processor, so now is a good time to have developers start making apps optimized for the new chips.
Innovate or die
But Microsoft's foray into convertibles with the Surface resulted in a nearly $1 billion writedown, so why would Apple want to follow suit with its own version of a larger tablet? After all, even Apple CEO Tim Cook has criticized Microsoft's attempt in the category.
The Surface is a "compromised and confusing product," he said during Apple's 2012 fiscal fourth-quarter earnings call. "I suppose you could design a car that flies and floats, but it wouldn't do all of those things very well," Cook continued.
Despite Cook's negative comments toward Microsoft's Surface, Reitzes believes Apple will eventually launch a larger iPad -- Apple-branded keyboard cover accessory and all. Apple's 64-bit processor and and iWork, now offered as a bundle, both would be better served on a larger, more powerful iPad, he explains. For this reason, he sees both the 64-bit processor and the bundled iWork as evidence that Apple is moving in this direction.
If any company could lead consumers in a major shift in the way they use technology, it is Apple. It's done it before (on multiple occasions) and it could probably do it again. But does the shift to convertibles make sense?
There would certainly be challenges. As a company that is always focused on trade-offs, would convertibles mean choosing a lesser middle ground with the same confusing experience Cook referred to in reference to the Surface? Even more, there would be some inevitable cannibalization of regular-sized iPads, Macs, and even iPad Minis. Would the cannibalization be worth it?
But times do change. And the world is becoming much more familiar with the mobile interface. It's natural, therefore, to imagine desktop and mobile experiences taking on increasingly similar features, blending the user experience.
In his recent interview with Bloomberg Businessweek, Cook said that Nokia suffered in the transition to smartphones because it didn't innovate. "To not innovate is to die," he said. Maybe Reitzes is right and the time and place are finally right for Apple to make its move into convertibles.
What do you think? Is the 64-bit A7 evidence that Apple now intends to launch a larger tablet? Does the convertibles category finally make sense for Apple?
What's next for Apple?
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