While tablet sales have steadily declined, there may be reason to believe they can recover.
Business users and the growing popularity of 2-in-1 devices like Microsoft's (NASDAQ:MSFT) Surface line may bring about a sales recovery, according to a new survey from J. Gold Associates. The research, which was first reported on by ComputerWorld, showed that the number of companies that will have over half their employees using tablets will grow by over 155% in the next three years.
That news comes at a time when Microsoft has not only expanded its Surface Pro line of tablets that also function as laptops, but launched Surface Book, a laptop that's also a tablet. Apple (NASDAQ:AAPL) has also jumped into the hybrid market with its iPad Pro, its first tablet being sold with a company-created keyboard add-on offered.
How bad are tablet sales?
After initially predicting a 3.8% year-over-year decline in tablet sales, International Data Corporation (IDC) has revised its 2015 prediction and now expects an 8% drop. That's a fairly dismal outlook for 2015, but the research company believes the market will return to growth in 2019 fueled by business customers using hybrid devices.
IDC predicts that sales for 2-in-1s like the Surface, SurfaceBook, and iPad Pro (which it counts as tablets) will grow 86.5% year over year in 2015, with 14.7 million units shipped. That's still a tiny piece of the overall 212 million tablet market, but the numbers should pick up in years to come. That will be driven in part by falling prices and more companies entering the fray.
"With more OEMs offering devices in this segment, prices have started to come down significantly, said IDCs Ryan Reith in a press release. "We estimate that over 40 different vendors shipped 2-in-1 products in the second quarter of 2015, which is up from just 14 vendors two years ago."
The hybrid market will also be helped by Apple getting involved and by Microsoft replacing the unpopular new-look Windows 8 with the more familiar Windows 10.
Business will lead the way
Before the launch of Surface in 2012, most tablets were marketed as consumption devices, not work platforms. The most successful of those, Apple's iPad, offered a lot of potential business uses, but it was presented to consumers as a platform for watching video, playing games, and other non-work uses.
Tablets' ability to use productivity software like Microsoft Office was generally noted, but not pushed. Essentially, tablets were a fun-first category, and the ability to check email or view a spreadsheet was a secondary feature.
Surface, then Surface Pro and SurfaceBook, now joined by iPad Pro (as well as countless hybrids made by other companies) effectively changed all of that. Now corporate customers appear to be catching up, and consumers are embracing the hybrids as productivity machines that can also be used for fun.
IDC Tablets Research Director Jean Philippe Bouchard expects corporate adoption to accelerate. He said corporate IT departments will need time to evaluate Windows 10 and iPad Pro, but she expects 2-in-1s will take over some of the market share held by laptops and traditional tablets.
"So far, this category has been led by Microsoft with its Surface product line," he said. "But with the arrival of the iPad Pro, the launch of Windows 10, which is better suited for the 2-in-1 form factor, and the introduction of Intel's Skylake silicon, we expect a flurry of new devices to launch between now and December 2015."
It just makes sense
Surface and the other Windows 10 hybrids it inspired have steadily become viable alternatives to traditional laptops. Even the original model Surface RT, with all of its drawbacks, worked reasonably well in both its tablet and laptop modes.
The latest generation of hybrids, including Surface Pro 4, Surface Book, and iPad Pro, bridge that gap even further. You could argue that Surface Book is actually all the way there, and only its roughly $1,500 starting price is keeping it from gaining significant market share.
Going forward, there is no reason to believe the laptop mode of the 2-in-1s won't improve to make their usability equal to a stand-alone tablet or laptop. As prices fall, that will make corporate adoption of the devices essentially a two-for-one deal that makes no sense to pass up.
It will take time, and neither Apple nor Microsoft should expect a return to the days when tablets were a double-digit growth business, but business use of hybrids should eventually stop the sales decline.
Daniel Kline owns shares of Apple and Microsoft. He owns a bunch of tablets and an original Surface but prefers his MacBook Air. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Microsoft. The Motley Fool recommends Intel. 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.