Apple Gets Free Advertising Other Companies Could Only Dream Of

Apple's (NASDAQ: AAPL  ) management no doubt enjoyed last week's Jimmy Kimmel Live: The company got the sort of advertising its rivals would kill for, and it didn't cost Apple a dime.

In a hilarious mix-up, the show's host, Jimmy Kimmel, presented a guest with Sony's (NYSE: SNE  ) Xperia Z tablet. The guest, being a 5-year old boy, failed to obey proper social procedure, handing Sony's tablet back to Kimmel and explaining that his family was "planning to get an iPad for Christmas."

Still, while Apple may have won the hearts of 5-year old geniuses, its investors shouldn't get too complacent. Tablets powered by Google's (NASDAQ: GOOGL  ) Android are finally starting to challenge Apple's iPad.

What's wrong with the iPad?
The last two quarters haven't been great for Apple's iPad. In October, Apple reported that it sold 14.1 million iPads in the third quarter, up just 100,000 from the prior year. In the second quarter, Apple's iPad business actually contracted, down 14% on a year-over-year basis.

Obviously, the iPad isn't going away, but the trends shaping Apple's tablet business are unprecedented in its recent history. Less than four years out from its introduction, the iPad business appears to have peaked -- it took 7 years for the iPod to peak, and the iPhone business (when adjusted for quarterly swings) still looks like it's growing.

The new iPad Air and iPad Mini with retina display could reignite demand for Apple's tablets. Certainly, iPad sales will be a crucial number to watch for in Apple's next earnings report.

Sony is one Android OEM to watch
Sony, meanwhile, is one Apple competitor investors should keep an eye on. When it comes to tablets running Google's Android operating system, investors may be inclined to think Samsung -- indeed, Samsung is the largest manufacturer of Android tablets.

But in the last year, Sony has emerged as a viable threat. Sony's Xperia Z -- the tablet rejected on Jimmy Kimmel -- was arguably the iPad Air six months before Apple released it. When it first went on sale, the Xperia Z was the lightest and thinnest tablet on the market; Sony even compared its tablet to a pencil months before Apple did the same.

Sony plans to focus on its mobile division going forward. Last month, the company posted a disappointing loss, as demand for TVs, PCs and cameras came in weaker than expected. Sony's mobile division was a lone bright spot.

As Sony shifts its focus to mobile, the company's management has said it will stick with the high-end, offering expensive Android tablets and smartphones that will compete directly with Apple's offerings.

First smartphones, now tablets
Eventually, 2013 could go down as the year tablets powered by Google's Android finally overwhelmed Apple's iPad. Several firms, including Canalys and ABI Research, have reported that Google's hardware partners combined to surpass the iPad in 2013.

In large part, that's no thanks to Sony -- though its expensive Android devices could eventually challenge Apple, they don't appear to be selling well right now. IDC reported that Sony didn't even crack the top five tablet vendors in the third quarter. Perhaps that's why Kimmel's guest didn't want a Sony tablet.

Regardless, Apple's tablets appear to be losing ground to Android-powered rivals -- free advertising or not.

Would you take an iPad over Sony's tablet?
Apple's newest iPad Mini with Retina display might be hard to come by this quarter, given all the reports of supply constraints. Well, we're going to be sure to get a few -- and give them away! That's right: For the first time ever, The Motley Fool is hosting a contest where you can win a free iPad Mini with Retina display. All you have to do is tell us why you love The Motley Fool by clicking here! We'll pick the three most Foolish submissions to receive a free iPad Mini with Retina display.

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Comments from our Foolish Readers

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 November 12, 2013, at 3:38 PM, RadarTheKat wrote:

    I have a cutting board in my kitchen that's sleek and thin as a pencil. And it about as useful as a thin-as-a-pencil table that doesn't run iOS. That's the point, when you get right down to it. The ExperiaZ, without iOS, might as well be used as a cutting board. When will the analysts and investing community finally realize this? Well, maybe never. No matter.

  • Report this Comment On November 12, 2013, at 4:14 PM, Tim1T wrote:

    I generally expect Foolish analysis to cut a bit deeper than this. First we start with a headline that has little to do with the body of the article -- about whether the iPad demand has weakened.

    But the core of Sam's analysis is flawed. He says that "the iPad business appears to have peaked..." and supports that with the fact that iPad demand was weak for the last two quarters.

    A more thorough analyst would have mentioned the fact that demand was weak because the iPad and iPad Mini hadn't been refreshed for something like a year. The new iPad came out a month ago and Apple still can't fulfill demand. The new iPad Mini was just released today -- with the same 64 bit CPU and a Retina display -- and that one is expected to sell even better than the new iPad.

    If Sam truly believes Apple won't break iPad records this quarter, he's living in his own Reality Distortion Field.

    Sam is right in saying that more Android tablets are being sold. But most of those numbers are from cheap tablets made in and sold to the Chinese market. If you look at the numbers for the premium tablet market -- Apple's competitive space -- then Apple's tablets continue to be dominant.

    And if you look at tablet profits, Apple is equally dominant. Sam should have mentioned those facts rather than comparing apples to oranges.

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