Nvidia (NASDAQ: NVDA ) has just introduced the Shield tablet, a high-powered Android device that the company calls the "ultimate tablet for gamers."
The tablet is equipped with an Nvidia Tegra K1 processor, an 8-inch full HD display, front-facing speakers, support for microSD cards up to 128GB, and optional LTE connectivity. It comes in 16GB ($299) and 32GB ($399) versions and is currently available for preorder. An optional $60 wireless controller, which has a built-in microphone (for chat and voice search) and a touchpad, improves the gaming experience for controller-compatible games. A $40 tablet cover can also be used as a kickstand.
The Swiss Army knife of gaming
The Shield tablet is compatible with all Android games on Google Play, as well as 400 Shield-optimized games available through Nvidia's Shield Hub -- 11 of those games are optimized for the Shield's Tegra K1 processor.
Gamers can stream games from a desktop or notebook to the tablet using Nvidia's GameStream and GRID technologies. Gameplay videos can also be streamed to Twitch with the Shield's ShadowPlay video capture tool. The Shield also has a "console mode," which allows tablet games to be played on big-screen TVs in native 1080p HD.
Simply put, the Nvidia Shield tablet is the "Swiss Army knife" of gaming. But will anyone actually buy this high-powered device, which straddles the two saturated markets of tablets and consoles?
Is the Shield tablet superior to other tablets?
It will be tough for Nvidia to carve out a niche in the tablet market. Apple's (NASDAQ: AAPL ) iPad has a dominant 76% market share among U.S. consumers, making it the top platform for game developers. Nvidia's Shield tablet costs the same as a comparably powered iPad Mini.
While the iPad Mini doesn't offer as many bells and whistles as the Shield out of the box, customers can easily add similar features.
Sony's (NYSE: SNE ) DualShock 4 controller, along with other wireless controllers, can be paired to iPads. PC-to-iPad game streaming solutions like OnLive, Gaikai, and iSwifter have existed for years. Valve could soon make entire Steam libraries playable on iPads and Android tablets via Steam In-Home Streaming. Twitch recently started adding live streaming for iOS games. iPads can even be converted into "consoles" by simply connecting the tablet to the TV and playing games with a wireless controller.
While those solutions are not as elegant as Nvidia's setup, it becomes painfully clear that Nvidia's buzzwords -- GameStream, GRID, and ShadowPlay -- are really just fancy ways to repackage existing technologies.
Is the Shield tablet superior to other consoles?
The Shield also faces a steep uphill battle in becoming an alternative home or handheld console. The home console market is controlled by Sony's PS4, Nintendo's (NASDAQOTH: NTDOY ) Wii U, and Microsoft's Xbox One. The handheld market is dominated by Nintendo's 3DS, with Sony's PS Vita trailing in a distant second.
Hopeful competitors tried to carve out a niche in those markets with Android-based home consoles like the Ouya and Mad Catz MOJO. Neither console ever became popular. Last year, Nvidia launched its Shield handheld, its predecessor to the Shield tablet. Nvidia has never released official sales figures for the Shield handheld, but a price cut from $299 to $199 in March speaks volumes about demand.
The key problem is that customers place PC/console games and mobile ones in separate categories regardless of graphics. PC and console games are full-featured titles that people are willing to pay $50 for. Mobile games are short casual titles that are free, cost a few dollars, or profit from constant microtransactions.
Nvidia, Ouya, and Mad Catz are trying to convince gamers that the two ecosystems belong together. Unfortunately, PC and console gamers still consider Android games to be "casual," thanks to games like Candy Crush Saga and Angry Birds. Meanwhile, trying to convince casual mobile gamers to stream triple-A games to their tablets will only appeal to a small sliver of gamers who love Skyrim and Candy Crush equally.
By comparison, Valve's Steam Machines strategy -- which puts PC games on TVs -- is a sounder plan because it completely targets hardcore gamers rather than casual ones.
The Foolish takeaway
Like the Shield handheld, the Shield tablet probably won't gain much of a following beyond a niche group of hardcore gamers. The Shield tablet is a beefy beast, but it doesn't really bring anything new to the table that can't already be done on an iPad or Android tablet. Meanwhile, Valve could deal the killing blow to Nvidia's cloud streaming efforts by expanding Steam In-Home Streaming to all tablets.
The Shield family won't matter much to Nvidia, since its core business consists of graphics cards and mobile processors -- which have been doing fine on their own. Last quarter, Nvidia's GAAP-adjusted revenue rose 16% year-over-year while its earnings per share soared 85%.
I believe that Nvidia will only produce a limited number of Shield tablets, since it knows that demand is fairly limited. However, the Shield tablet can still serve as a technical showcase of the Tegra K1's graphical processing prowess, which could convince more tablet makers to adopt the mobile processor.
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