Is Apple's Tim Cook Changing His Mind?

Apple (AAPL 0.52%) CEO Tim Cook has, on many occasions, attacked Microsoft's (MSFT -2.45%) Windows 8 strategy. With Windows 8, Microsoft created a hybrid operating system -- one that could adequately power both a tablets and traditional PCs -- which Cook has criticized repeatedly.

But reports have indicated that Apple could be about to do the same. Apple is said to be working on a larger, 12-inch iPad, one that could come with a keyboard and double as a sort of hybrid device. If Apple takes that step, it would suggest that Microsoft, despite failing with the Surface, is on to something. It could also weigh on chipmaker Intel (INTC 1.77%).

Microsoft is confused
Although he's never referred to Microsoft directly, Cook has made a steady stream of statements critical of Microsoft's current operating system. Last year, he remarked that any two devices could, in theory, be combined, though it doesn't always make sense to do so. A toaster/refrigerator combo is possible, for example, but not likely to please users.

Then, when Cook unveiled the iPad Air, he said Apple's competitors (read: Microsoft) were "confused," making tablets into PCs and PCs into tablets -- a clear reference to Microsoft's decision to give Windows 8 dual-interface functionality.

And so far, Cook has been right. There's been a fair amount of backlash to Windows 8 among consumers, while sales of Microsoft's own Surface tablets have been lackluster -- the company took a $900 million writedown on Surface hardware back in July.

An iPad Pro?
But is Apple about to do the exact same thing? It has a patent on such a device, and analysts at Nomura believe that Apple will unveil an iPad hybrid next year. A report from a Chinese tabloid said Apple is currently testing an iPad with a display around 12 inches, which would be an ideal screen size for a hybrid device.

There are other signs that Apple is gearing up for such a launch. Consider the name of its new iPad, the "iPad Air" -- just like the Macbook Air. Extending that naming convention, an "iPad Pro" seems like next the logical next step.

Also, consider that Apple has started to bundle its Microsoft Office competitor, iWork, with its iOS devices. Without a keyboard, iWork is hard to use, yet it's useful to some iPad owners -- the ones with third-party keyboards. By pushing iWork, Apple obviously understands that there's a market for people who use its iPad like a traditional laptop.

Tablets could take an even bigger bite of the PC market
If Apple does release a hybrid tablet in the form of an iPad Pro, it would, in a sense, validate Microsoft's strategy: Apple would be conceding that there's a market for hybrid devices. That's not to say it would benefit Microsoft -- it would be even more competition for Microsoft's Surface tablets (and other hybrid tablets running Windows 8), but Intel, not Microsoft, would be the company for investors to watch.

Apple's iPad Air contains the A7 processor, the first 64-bit ARM-based mobile chip Apple has used. That extra power is largely superfluous for mobile computing, but it could be useful for traditional PC applications. If Apple releases a hybrid, it will almost assuredly use one of these 64-bit chips, and that's not good for Intel.

Intel has made little headway in the mobile market, as most tablets and smartphones use chips based on its competitor, ARM Holdings, designs. Intel's chairman admitted that the company had "lost its way" earlier this week, and Intel's new CEO has vowed to change that. But, at least for now, Intel remains far behind its competition. Yet Intel retains the majority of the traditional PC market, which has limited its share depreciation.

But an iPad hybrid could cannibalize many sales of traditional PCs. More dangerous would be Apple's Android-based competitors that would surely follow. In short, if Apple's iPad Pro triggers a wave of larger mobile tablets with hybrid laptop functionality, the market for Intel's Ultrabooks could shrink dramatically. However, that isn't to say that all hope would be lost for Intel. Last week, Intel announced that it plans to release chips that can run 64-bit Android next year.

More devices in 2014
Apple's management has promised to release new devices in 2014, and one of those could a hybrid tablet. If Apple does release such a device, it could contradict Cook's stance on hybrids, though Apple has done similar things in the past. Steve Jobs famously criticized small Android tablets -- and then Apple released the iPad Mini.

Hybrid tablets have found little success so far, but if Apple is thinking about entering the market, the hybrid story is far from over.