Who Will Pay for Samsung's Tab?

South Korean electronics giant Samsung  (NASDAQOTH: SSNLF  )  is readying the next versions of its high-end tablet, the Galaxy Tab S, which will go on sale soon. Will the new devices have what it takes to surpass the iPad, the market leader from Apple, (NASDAQ: AAPL  ) ? Even if that happens, will it make a difference for investors? 

Another tech giant, Microsoft  (NASDAQ: MSFT  ) , known primarily for software and operating systems, also has a new entrant into the tablet world. Or, is it a PC?

Growth on the decline
After several years of breakneck performance, the latest estimate from IDC points to slowing growth in the tablet market. 

One possible reason for the predicted decline is the proliferation of larger smartphones. Phablets, with displays bigger than 5-inches, might be eating into sales of tablets with smaller screen sizes, like the 7.9-inch iPad Mini and the 7-inch Galaxy Tab 3 and 4. Consumers typically utilize only one device for their mobile needs, so why not get one that can actually be used to talk on, too? Plus, who's to say that, down the road, even bigger phablets won't penetrate into the mid-size tablet space?

Glaringly, Apple does not offer a phablet, yet. But, that could change later this year.

Another factor is that many users are holding onto their tablets and refresh cycles are getting longer. So, the tablet "fad," created by Apple when it introduced the iPad in 2010, could be coming to an end if the latest trend continues. The release of the Tab S may not move the needle for Samsung, and investors might want to take a wait-and-see approach.

Bigger is better
The outlook for smartphones may be a more important issue for Apple and Samsung shareholders to consider. In general, the market seems to be growing, and bigger devices are becoming more popular. 

Samsung has been addressing this facet of the business and currently offers two devices with displays over 5-inches, the Galaxy S and Note. Therefore, it might be critical for Apple to release a device with a larger screen to compensate for a drop-off in tablet sales and to continue fending off Samsung.

Rumors point to a bump in size for the next iPhone. Devices with 4.7-inch and 5.5-inch displays are reportedly being developed in the Cupertino labs and could be available in time for the holiday shopping season. If this pans out, the long run of the iPhone as Apple's cash cow will likely continue.

Scratching the surface
Microsoft's Surface Pro 3 is a 2:1 device, functioning as both a tablet and a PC, when combined with a keyboard and adjustable kickstand. It has a large 12-inch screen and a stylus, which allows users to input information that way instead of with the keyboard or their fingers. 

Early reviews indicate that the Surface performs better as a traditional PC than a tablet, and Microsoft may want to target the device to the enterprise market, which is one of the few bright spots in the space. However, the company will have to overcome previously unsuccessful forays into hardware for investors to profit. Earlier versions of the Surface were not brisk sellers, to say the least. Even with all of the enhancements Microsoft built into this latest model, it will be difficult for the company to gain share and make a dent in the market. 

Foolish conclusion
Samsung will start selling updated versions of its top-of-the-line tablet soon. However, based upon the latest trends in the mobile device industry, consumer focus may be shifting away from tablets to smartphones with big screens. It remains to be seen who will pay for the Tab S and return value to Samsung investors. 

Apple would be wise to finally offer a phablet to cushion the blow from reduced iPad sales and compete against Samsung in smartphones. Investors will continue to profit from the iconic device, which has provided wonderful returns over the years. 

Microsoft keeps trying, and its latest hardware device, the Surface Pro 3, will attempt to compete in both the PC and tablet markets. It might have the best chance to succeed as a PC in the large business environment, but based upon earlier attempts with hardware, Mr. Softie could find it difficult to please investors. 

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