Graphics chip manufacturer, Nvidia (NASDAQ:NVDA), has recently announced the launch of its Shield Tablet, which features a Tegra K1 mobile processor and 8-inch display. This device is designed to appeal to avid gamers, and sets itself in a high-end gaming market. As a result, it could successfully enter the saturated tablet industry, and take a share of the mobile gaming device market. For that matter, it could pose a threat for Japanese giant, Sony (NYSE:SNE), the current leader of overall handheld and console gaming devices, and Apple, the leading tablet maker in the U.S.
Strong differentiation features
Besides its processor and full-HD screen, the Shield Tablet contains other features designed to target gamers. It allows users to stream video games from their PCs, through GameStream, and from the cloud, through Grid. Moreover, it gives access to Twitch, a leading online gamer community in which people can share or watch gameplay videos. This platform counts with 45 million unique visitors every month, over 1 million broadcasters, and average users watching more than 106 minutes of video a day.
With the Shield controller, priced at $59, customers can use the Shield Tablet as a console to play video games displayed on an HDTV. The tablet also includes a stylus and a recently created app, called Nvidia Dabbler, which can be used for creative artwork or taking notes. In that way, as it is designed to offer a high-quality gaming experience, the tablet has a strong differentiation from its competitors, a strength in its entrance into the market.
Entering tablet market through gamer niche
Nvidia can provide gamers with an Android tablet that satisfies their want of playing video games outside of their homes or on-the-go. Yet, this device mainly appeals to a relatively small number of gamers, which have Nvidia-powered computers at home that allows them to stream titles from GameStream. In comparison to the average tablet user, these gamers have the greatest amount of incentives to buy the Shield Tablet and controller, which could limit sales. Still, this niche seems like a proper gateway to the saturated tablet market, as it helps the Shield Tablet gain initial popularity.
Facing tech giants
When it comes to high-end mobile gaming, customers face an appealing alternative, the PS Vita, manufactured by Sony. Moreover, the Japanese giant's PlayStation 4 leads the console market since its launch in late 2013. Recently, The Wall Street Journal reported that Sony has surpassed both Nintendo and Microsoft in overall game device sales so far in 2014, considering both handheld and console products. Since these three companies have well-established brands, they threaten Nvidia's efforts to enter the mobile and console markets with the Shield Tablet.
Apple also poses a threat, since it is the leader of the U.S. tablet market, which appeals strongly to game developers. Moreover, its iPad Mini, priced at $299 like the Shield Tablet, has received outstanding reviews due to features like portability and battery life.That said, Nvidia could surpass these external challenges through its unique gaming differentiation, allowing its users to stream their PC games. This aspect seems more valuable than the iPad's apps and mobile games. In addition, the Shield Tablet offers a variety of gaming experiences, from casual Android games to serious PC titles.
Final Foolish Takeaway
Through strong differentiation, Nvidia could successfully enter the tablet and handheld/console markets. The company would mainly capture a gamer niche, especially people who play in PCs powered by Nvidia's GPUs, as they can benefit the most from the Shield Tablet's features. As a result, the company can enjoy a new revenue stream aside from its growing core business. However, it faces tech giants like Sony -- which surpasses Nintendo and Microsoft in sales of gaming devices -- and Apple, the maker of the acclaimed iPad Mini. Still, Nvidia could efficiently contend with these companies through its multipurpose tablet, able to play games in a variety of ways.
Alvaro Campos has no position in any stocks mentioned. The Motley Fool recommends Apple and Nvidia. 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.