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Apple and Microsoft Could Use Tablet Accessories to Boost Demand

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Are tablets passe? Maybe not, but they certainly don't appear to be the hot gadget they once were.

According to Pew Research, more than a third of US adults now own one, up dramatically from 2010, when just 3% owned a tablet. Last quarter, sales of Apple's (NASDAQ: AAPL  ) iPad came in worse than expected, while Microsoft (NASDAQ: MSFT  ) was forced to take a $900 million writedown on its Surface tablet.

In an attempt to juice demand, companies could be turning toward accessories. Alongside its Surface 2, Microsoft announced a number of hardware add-ons; meanwhile, Apple's recent iPad invitation suggests it could have something similar in the works. Ultimately, the move into accessories could be problematic for companies that depend on selling them, including Logitech (NASDAQ: LOGI  ) .

Microsoft's hoping more accessories will help revive the Surface
Right from the beginning, Microsoft focused its tablet strategy around an accessory -- namely, its proprietary Surface cover, which doubles as a protective shield and a keyboard/mouse combo.

When Microsoft released the Surface RT last year, it was late to the game -- at that point, Apple had already released three generations of its popular iPad. To differentiate its product, Microsoft emphasized the Surface cover, which -- paired with the Surface's built-in kickstand -- allowed the tablet to double as a laptop.

Obviously, that didn't work as well as Microsoft expected. Microsoft was forced to take a $900 million writedown on the Surface, after sales of the device were weaker than the company anticipated.

But rather than get away from that strategy, Microsoft is doubling down. Alongside the Surface 2 and Surface Pro 2, Microsoft announced a "power cover" -- a Surface cover that contains an external battery. Microsoft also announced a docking station for the Surface Pro 2, which allows owners to easily transform their tablets into a desktop workstation.

Does Apple have its own Surface-like cover in the works?
Admittedly, it's only conjecture, but there's some signs that Apple could be about to roll out more tablet accessories of its own.

On Tuesday, Apple sent out invitations to an Oct. 22 event. Most analysts expect the company to announce refreshed iPads, including a slimmer full-size iPad and a second-generation iPad Mini with a Retina display. Will it also announce some accessories?

In its invitation, Apple writes that it still has "more to cover." Given the company's tendency for word plays -- the invitation to Apple's iPhone event in September made reference to bright colors -- that seems to suggest some sort of iPad cover.

Apple has filed patents for a Surface-like iPad cover, although admittedly, the company doesn't always follow through on these filings. Nevertheless, some sort of keyboard cover for the iPad wouldn't surprise me, especially given Apple's recent foray into iPhone cases, and its decision to emphasize iWork.

With the release of iOS 7, Apple made iWork free for new iOS devices. iWork is Apple's answer to Microsoft's Office, and though it's never come close to Office in popularity, offering it as a free download suggests that Apple might have longer-term plans in mind.

Of course, how good is iWork if you don't have a keyboard? The iPad's virtual keyboard is convenient, but not very effective for typing long documents.

Logitech looks to mobile to offset traditional PC weakness
Logitech makes several iPad keyboards. In fact, they make up the overwhelming majority of the tablet accessories Logitech offers.

As a company, Logitech is an accessory specialist. Historically, Logitech has focused on selling accessories for traditional PCs -- mice, keyboards, speakers, etc. -- but has been forced into new markets.

As sales of traditional PCs have slowed -- research firm Gartner just reported the sixth consecutive quarterly decline -- Logitech has looked toward gaming, audio and mobile for growth. During Logitech's last earnings call, management identified the Ultrathin Keyboard cover as Logitech's top mobile product.

Like Microsoft's Surface cover, Logitech's Ultrathin Keyboard acts as both a cover for the iPad and a keyboard. No doubt there's a large market for Logitech's products, but if Apple moves into space, it would bring a great deal of competition.

The next big thing: tablet accessories?
Microsoft has used its accessories --notably its keyboard cover -- as a key differentiator for its Surface tablet since the very beginning, and with new accessories coming out this year and next, Microsoft is only doubling down on the strategy. Apple, too, could look to do the same.

Logitech sees tablet accessories as an area of growth for its business, and perhaps it will be, but if it has to compete with the tablet makers themselves, it could have its hands full.

Tablets are great, but as a stand-alone product, limited in what they can accomplish. By pairing them with accessories, they can do more -- like replace a laptop or a desktop PC. If tablets are ever going to fully replace the traditional PC, accessories will be the key.

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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 October 17, 2013, at 4:28 PM, khaledmrd wrote:

    Apple doesn't have to come up with an ipad keyboard as they already had several companies producing all kind of designs and they taking royalty

    also there is little left for Apple to innovate in a Keyboard for ipad

    while Microsoft came out with a Keyboard for its surface to compete with ipad but didn't happen

    the Surface is a Windows 8 tablet that already compatible with tens of Microsoft new products for Windows 8/8.1

    if Microsoft is smart, it let companies like Logitech to create an accessories eco-system for its surface to give consumers more options and lure them as Apple did with ipad

    ipad doesn't support mouse or USB ports unlike Windows 8 tablets and convertibles

  • Report this Comment On October 17, 2013, at 4:30 PM, khaledmrd wrote:

    also Apple already have its own ipad covers with magnet, which Microsoft keyboard case resemble in its magnet

  • Report this Comment On October 18, 2013, at 8:05 AM, jdmeck wrote:

    Jobs rejected the keyboard cover idea years ago. (Do you think it is just coincidence that the Surface cover looks exactly like the iPad cover when closed?) I don't see a need for most people. The market is too small. Apple should let the third party suppliers take care of the market.

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