This Big Apple Inc. Rumor Could Be Totally Wrong

Some believe Apple is preparing to release a product that could devastate Logitech's business. They could be totally wrong.

Jan 29, 2014 at 2:00PM

According to Apple's (NASDAQ:AAPL) CEO Tim Cook, the company will unveil several new products later this year. Recent reports have suggested that one of those new products could be an iPad with a larger screen, a hybrid device aimed at enterprise users -- a trend that Samsung (NASDAQOTH:SSNLF) has already embraced.

Analysts at Evercore Partners said earlier this month that they expected Apple to unveil a hybrid tablet in the second half of the year, yet a recent Macworld article casts doubt on that notion. Based on Logitech's (NASDAQ:LOGI) last earnings report, there are plenty of people using iPads like laptops, but this is one trend the company might not capitalize on.

Would Apple change its mind?
If Apple did release a hybrid device, it would stand in sharp contrast to everything the company's management has said. Tim Cook has, on numerous occasions, mocked Microsoft's Surface, arguing repeatedly that traditional PCs and tablets are completely different devices that serve different purposes.

Apple's Craig Federighi reiterated that view in an interview with Macworld's Jason Snell, arguing that the iPad's operating system -- iOS -- was optimized for touch devices, while Apple's Mac operating system, OSX, was aimed at traditional PCs. He went further, calling a convergence of the two a "nongoal."

Samsung targets the enterprise with larger tablet
That hasn't stopped Samsung from offering a larger tablet aimed at enterprise users: The Galaxy Note Pro is a tablet with a 12.2-inch screen and a custom interface designed specifically for business.

Still, Samsung's new tablet isn't really a hybrid -- although it's clearly aimed at workers, Samsung isn't really pitching it as a laptop alternative. Samsung is selling a "book cover," for example, but no keyboard dock. Samsung has made some major modifications to the Android interface, but the tablet remains optimized for touch and Samsung's S-Pen stylus -- not mouse and keyboard.

Logitech profits from iPad keyboards
For anyone who wants to use Samsung's tablet like a laptop, Logitech has them covered -- literally. Ahead of the Galaxy Note Pro's release, Logitech already has a keyboard cover for the Note Pro available for preorder.

Logitech's business has long been based on the traditional PC, but with the market for laptops and desktops in decline, Logitech has shifted its efforts toward mobile -- much to its credit. Last week, Logitech posted an impressive quarter, exceeding analysts' expectations largely on the strength of its mobile efforts.

Although Logitech's net sales were up just 2.2% overall, tablet accessories sales nearly doubled from the prior year. While Logitech offers many different products, its tablet accessories are rather homogenous: virtually all of them are keyboard covers made for Apple's various iPads.

No hybrid, but that doesn't mean there won't be an iPad Pro
But even though Logitech has seen robust growth, its quarterly sales of $627 million is but a fraction of the revenue that Apple's iPad business generates -- although there's a sizable niche that wants them, most iPad owners don't have keyboard covers.

In that vein, it wouldn't surprise me if the Evercore Partners report proves to be wrong; based on Apple's comments, I would be shocked to see it release any sort of hybrid device. But that doesn't mean there won't be an iPad Pro -- like Samsung, Apple could unveil a larger iPad aimed at business users, although it likely won't come with any sort of keyboard.

In that case, the company most affected could be Logitech. Releasing a larger iPad could help spur demand for Apple's tablets; but for those who prefer to use them like traditional PCs, Logitech's covers could emerge the preferred solution.

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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Logitech International SA (USA). The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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