Apple's Copycat Product Could Threaten Intel and Logitech

Apple (NASDAQ: AAPL  ) is working on a keyboard cover for the iPad, according to AppleInsider. The publication cites a newly uncovered patent that could improve Apple's Smart Cover for the iPad by incorporating a multitouch keyboard -- similar to Microsoft's (NASDAQ: MSFT  ) keyboard cover for its Surface tablet.

Apple's iPad keyboard (should it choose to release it), combined with Microsoft's decision to bring Office to Apple's tablet, could pose a significant problem for rival tech firms. In particular, Logitech (NASDAQ: LOGI  ) and Intel (NASDAQ: INTC  ) could face substantial pressure.

Microsoft finally brings Office to the iPad
On Thursday, Microsoft finally unveiled Office for the iPad. Subscribers to Office 365 can now create and edit Word, Excel, and PowerPoint documents on Apple's popular tablet. With virtually every major corporation using the iPad in some capacity, Microsoft stands to gain substantial revenue from its new version of Office -- perhaps as much as $2.5 billion on an annual basis, according to analysts at Morgan Stanley.

But how useful is Microsoft's software suite without a keyboard? Microsoft has gone to great lengths to make Office for the iPad touch-friendly, but it's difficult to imagine doing much work in Word or Excel with just a touchscreen.

Why Logitech investors should be weary
Right now, owners of Apple's tablet can purchase a third-party bluetooth keyboard if they want -- indeed, many of them already do. So many, in fact, that Logitech's tablet accessories business has been booming -- up 95% last quarter.

To be clear, Logitech's tablet accessory business includes more than iPad keyboard covers, but a quick perusal of Logitech's website shows that the vast majority of its tablet accessories are keyboards for Apple's tablets.

Logitech also makes keyboards for two of Samsung's Galaxy tablets and a generic stand-alone bluetooth keyboard that it markets for "Windows and Android" tablets, but nothing aimed at the Surface. That's probably not a coincidence; Microsoft has that base covered, with a variety of its own keyboards that it advertises alongside the Surface.

Logitech's tablet accessories only account for about 13% of its revenue, but it is the company's single biggest growth area. If Apple releases its own keyboard cover, it's hard to imagine Logitech's tablet business remaining unscathed.

More PC cannibalization
Like Logitech, Intel could also feel some pain, though to what extent remains unclear. Traditional PC shipments declined 10% in 2013, and IDC expects the market to continue to contract in the years ahead. Tablets, particularly Apple's iPad, have weighed on the market for PCs and, by extension, Intel's processors.

But this cannibalizing effect has largely been limited to the consumer market. On its last earnings call, Microsoft admitted that for consumers Windows demand declined about 20% last quarter. Enterprise demand, meanwhile, has remained robust -- although businesses are employing Apple's tablets, they still need Microsoft's Windows and PCs powered by Intel's chips.

That might change if Apple releases a keyboard cover. With Microsoft's Office now on the iPad and a keyboard solution from Apple, some business users might be tempted to replace their Windows laptops with an iPad. Obviously, there's still a lot of unknowns, but if Apple does release a keyboard, investors should see it as a negative sign for Intel.

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Read/Post Comments (8) | Recommend This Article (3)

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 March 30, 2014, at 2:36 PM, SSchlesinger wrote:

    "Like Logitech, Intel could also feel some pain, though to what extent remains unclear. Traditional PC shipments declined 10% in 2013, and IDC expects the market to continue to contract in the years ahead. Tablets, particularly Apple's iPad, have weighed on the market for PCs and, by extension, Intel's processors."

    How are you explaining the drop in market share for the iPad? You are drawing simple cause and effect scenarios forgetting factors like a world recession, so please explain this. There is absolutely no proof that PC sales will continue to contract for years ahead.

  • Report this Comment On March 30, 2014, at 2:51 PM, JarJarThomas wrote:

    Drop in market share for ipad is simple.

    Every 50$ tabket in third party worlds, or every 30$ tablet which is a child toy are calculated the same as an ipad air with 128gb.

    One is a toy, the other is a real tool.

    Ignore market share, look at usage.

    If not ... well i would assume you only flame

  • Report this Comment On March 30, 2014, at 4:22 PM, reality150 wrote:

    Actually he is correct, recession played a big part in it, and that hit in 2008? Tablets cannot replace computers. People were upgrading computers more often, prior to the recession, Lets not forget saturation, plus the fact that computers pretty much peaked in innovation the last few years so a 3 year old computer still has almost same exact specs as the computers being produced today. Main thing upgrading is video cards. So people dont feel like they are really getting anything but upgrading there pc's

  • Report this Comment On March 30, 2014, at 8:41 PM, Carling wrote:

    I still use a 14yr old Dell 1100 Laptop that has 512 meg of ram and no hard drive. I boot it up from a cd/dvd or a usb jump/flash drive sd memory card. It runs the latest March 2014 Linux Sperating System. It can't run W7 or W8. I can do anything and everything I want with it you name it I can do it...

  • Report this Comment On March 30, 2014, at 9:23 PM, ban566 wrote:

    ms had no choice but to bring office to the ipad

    on the heals of many corporations like the one i work for that is a world wide operation finding out they can do every thing out side of the office on android devices for cheep

    using Polaris office and and other free open source office programs it is only a matter of time before they find a way to migrate it to the desktop workstation for free compared to buying office wait i mean leasing ms office for a yearly subscription for every workstation for a big time operation cost savings

  • Report this Comment On March 30, 2014, at 10:19 PM, techy46 wrote:

    MS isn't just bringing out Office 365 for the iPad. Office 364 is available from any browser. MS intends to put Bing, Office and Windows Store apps on any OS that they can release a runtime for including Android and Windows. The Nokia X rniing Android and Metro UI can run Android apps, Office 365 and Windows apps soon.

  • Report this Comment On March 31, 2014, at 2:58 AM, joeduke430 wrote:

    I don't know if you can call it a copycat device since Apple filed a patent for a smart cover with a keyboard in 2011, a year before the Surface was released.

  • Report this Comment On March 31, 2014, at 12:19 PM, KeyCuts wrote:

    The move to bring Office to the iPad is huge for the enterprise segment. With more employees requesting to access work documents on their phones and tablets, this is just another big step for Microsoft in terms of getting after the enterprise cloud users.

    We are big users of Google Drive since most of the time we just use Google Sheets and Google Docs to read or do basic edits to our data or content. We don't see employees doing any heavy lifting in Excel on the iPad creating formulas and PivotTables.

    Speaking of the multitouch keyboard covers, we are curious to see what Microsoft comes up with to make the iPad more tactile. We have developed a keyboard cover for Macbooks that aim to teach you how to use Excel keyboard shortcuts for the Mac. Many of our customers have said that they avoid using Excel on the Mac since they came from using a ThinkPad or another PC, and the shortcuts aren't the same.

    We wanted to make that transition easier by showing you the 20 most commonly used keyboard shortcuts right on the keyboard cover for formatting and manipulating data. Consultants, analysts, and finance people who use personal Macbooks utilize our covers to learn the shortcuts and also to keep their keyboards free from dust and dirt.

    To learn more, check out www.thekeycuts.com/shop/keyboard-covers

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