Running up the score: Thoughts on iPad 2 announcement

Commentary: Why 2011 will be the year of iPad 2.

iPad 2There was a moment during the end-stages of the PC wars where it was so totally clear to everyone that the game was over. Well, everyone but Microsoft. Despite having won in a blowout fashion, Microsoft showed no signs of slowing down. They were still stepping fully on the gas pedal.

At the time, the sheer aggression of it all prompted a commentator to note that Microsoft was crushing the competition 99-0 (in football terms), yet they were still running up the score.

I bring up this point up because it helps frame my takeaway from Wednesday’s iPad 2 announcement.

For while it may be tempting to see the battle between iOS-powered iPads and Android-powered tablets as likely to be close, the truth is that Apple is blowing out the competition. The competition has no offense, no defense, and in the words of Steve Jobs, is getting “flummoxed.”

And they should be. Why? Because comparisons to Android’s strong competitive effort in the smartphone realm hide the fact that in the media player realm — arguably the closer analog to the iPad’s domain — Android is a total non-entity. This speaks to the simple fact that when you remove the artificial “pull” of mobile carriers from the media/tablet realm, Android devices are hosed.

Strong words to be sure, but consider this: we have already established ad infinitum that a tablet is a “tweener” device — not quite a PC, but more than a smart phone. As such, it’s a discretionary buy.

Now putting aside the fact that Apple just sold 15M iPads in only 9 months of 2010, yielding $9.5B in revenue, it does not follow that other entrants into this segment should expect even remotely comparable success anytime soon. Here’s why:

Dumb channels + undifferentiated + more expensive = fail

Apple retail store

Discretionary buys are heavily reliant on smart sales channels, where features, benefits and outcomes can be articulated. These channels ensure that early adopters achieve success in their nascent usage, which means they’ll continue to use the product and spread the word.

As Jobs beat into the ground during the iPad 2 keynote, Apple has this channel advantage you might have heard of: It’s called Apple retail, and they know how to sell-sell-sell. The Android Army by contrast has … has … (crickets chirping).

Playing effectively in such a domain requires competitive pricing (unless you really think someone is going to outflank Apple on the high-end), and both hardware and software differentiation.

The early data on competitive pricing is not encouraging for the would-be tablet competitors, where Apple’s $499 entry point on iPad has the competition flummoxed to the point of trying to only be a couple hundred dollars more than iPad.

Meanwhile, is there anyone that approaches Apple on hardware design? On a mass-market level, the answer is “no,” but I will grant you that here the competition is in the ballpark, and certainly can approximate Apple’s efforts and innovations.

But, when it gets to software differentiation I would submit that the very reason device OEMs are turning to Android is that they get discombobulated trying to understand software platforms, let alone execute on them.

Having cut my teeth professionally in the most hardware-centric of segments — network infrastructure and embedded systems — I can tell you that hardware people not only don’t grok software, they see it as something to be put in a corner so as not to conflict with hardware performance.

This is an anathema to the Apple vision of an “apps lifestyle.” This is one reason that despite the iPhone basically being an iPod with a phone wrapper, it still lacks a comparable iPod-iTunes competitor (see “Android’s Missing Leg“).

Remember the dig by naysayers that the iPad was merely an oversized iPod Touch? I am guessing that having seen the first few Android-powered tablets beginning to enter the stage (Galaxy, Xoom) that the Android Army really wishes they could be as compelling as an oversized iPod Touch.

This, of course, should be no surprise since the apps lifestyle is a somewhat derided concept in the Android universe. As such, most non-Google Android apps are the sloppy second creations of their superior iOS siblings.

So why is Apple running up the score?

Here’s where the game starts to get ugly. When you are selling underpowered, overpriced products through uneducated channels, it’s much harder to get the proverbial dogs to eat the dog food than in the carrier-friendly model.

Had Apple done nothing new on the tablet front, then perhaps in a year the Android forces would have found the trinity of hardware design, software capabilities, and developer ecosystem to activate a forward march.

But during the PC wars Apple was on the other side of Microsoft running up the score, and Apple knows the bitter taste of being under-resourced, outmanned, and outflanked. Apple won’t stop running from its PC-whipped past into a Post-PC-dominant future until the competition waves the white flag.

Hence, when I look at the announcement of a seriously compelling iPad 2, I see this as Apple saying to the competition: “Your victory is not an option. Either retreat, or get beat.”

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  • AppleFUD

    Just had to stop reading this article as obviously this person has his mouth wrapped tightly around Jobs’ …. you know what.

    You have to love how Apple fans rationalize. Now the iPad is closer to a computer though you need a computer to use it but then it’s closer to the iPod?!?! And this is now why it will dominate where the iPhone has gotten slaughtered by Android even though the iPhone had a much longer head start than the iPad did?

    If Apple could dominate with products closer to computers. . . well then why do they only have 5% of the computer market?

    As Apple produces products closer in functionality to a computer the worse they do. Why? They are a closed down, overly proprietary, overly controlling company. They lack a wide range of hardware form factors to choose form and their operating systems suck. Yeah, all that control = better user experience? Sure, if you like living in a communistic environment or you are so easily lead by marketing that you are a lemming.

    The reality Apple fans don’t want to face is, Apple is a single company with a very closed environment that will NEVER be a long term market leader. Sure, they have a toy that does well after several years, the iPod–just like the Sony Walkman did well for a while, but it to will die as its functionalities are replaced by devices that do more. But then the iPod sells only 10M/year. . . big whoop! Vs `40M Android smartphones per quarter that can act as an iPod–yeah, rationalize that the iPod is still THE mp3 player!

    News today shows that 99.7% of the population does not own a smartphone or table! And Apple fans are already claiming market dominance and victory?

    What delusional imbeciles . . . and they wonder why the Mac is still at 5% market share?

    I swear, reading part of this article lowered my IQ by a point per paragraph.

  • Brent

    It is naive to state that Apple is “running up the score” when the game is essentially not even halfway concluded. Android’s operating system has really only been on the market for about two years (and widely distributed much less than that) and yet they have now achieved, by most accounts, a majority of the U.S. smartphone market. (iPhones/iPods had two-to-three years to build a lead on Android, and lost the lead in less than that time.)

    This doesn’t equate to similar success for Android on tablets, but it does show that Apple’s dominance will always be susceptible to overthrow–and not necessarily on a lengthy timeline–by cheap, ubiquitous, or (in some cases) superior competition.

  • http://colinscroggins.com Colin Scroggins

    @Mark: Given that we are still in the first quarter (calendar, not football) of official tablet support by the Android OS, I think that I will reserve my judgement for later.

    All of the complaints I am hearing leveraged against Android on tablets are the same ones I heard when Apple first expanded form factors with the iPad.

    Google is a fast learner, as demonstrated by their lead in the smartphone realm. Unfortunately, Apple seems to be repeating their mistakes in the developer realm. Punishing the services that made them a ubiquitous device (Netflix, Hulu, Amazon, Instapaper) shows a hubris and greed that disturbs me.

  • http://www.unicornlabs.com Mark Sigal

    @AppleFUD, what part of the hard data leaves you uneasy? Is it the DECADE straight of out-performance by Apple across Media Devices, Smart Phones, Tablets AND PCs? Is it the profit margins? Is it the cash generation? Is it the customer satisfaction and loyalty?

    I understand that for parrots whose only line is “proprietary, closed” the ONLY counter is to throw out Fanboy insults and talk about diminished IQ, when the truth is more complex.

    Apple’s strategy is to be vertically integrated, whereas the industry model is horizontal and loosely coupled.

    You personally may not like that, and it may offend your religious sensibilities, but the data is the data is the data.

    Even in your example with Android phones, all of the industry profits and flowing to Apple. Otherwise, you’d be saluting the true unit count leader…Nokia.

  • http://www/unicornlabs.com Mark Sigal

    @Colin, totally fair perspective, and Google absolutely is a fast follower, but I would submit that a key difference in Media and Tablet devices vs. Smartphones is that the sins of the hardware developer are more readily masked by carrier subsidies than these other domains where the device vendor lives and dies by virtues of penetrating indirect sales channels profitably.

    As to your last comment on mistakes that Apple is making, I posted earlier today on that very topic in a post called Paternalistic or Predatorial – ruminations on Apple’s Subscription B-Model Shift: http://post.ly/1hWBn

    Check it out, if interested, and thanks for the counter-perspective.

    Mark

  • @AppleFUD

    Who’s really the delusional one here? Where do you get your figures? What does Apple’s PC market share have to do with anything in this argument?

    If you truly didn’t believe Mark’s thesis you’d have kept quiet rather than trying to match him in word count.

  • Devon

    The author speaks of Apple undercutting competitors on hardware, forcing them to charge a couple hundred dollars more for an equivalent system, but fails to mention any data on that. Well, here is some data: My GTablet, which was bought last Christmas, outperforms every bit of hardware even in the iPad2. It had a dual core CPU back when the idea was laughably unnecessary in the tablet market. Total price? $249.99.

    As far as basing the argument on saying that it is a “media device”, I think that cuts the entire tablet industry short, including Apple. I’ve seen more iPad users utilize their tab for work-related functions than using it as a “giant iPhone touch”. And while it’s common knowledge that Apple dominates the media player market, I submit that the author is full of it if he thinks that the only utilization of a tablet PC is just to play music and video.

    I’m not saying Apple doesn’t have the propensity to win this one. They certainly have the resources necessary to win. I agree completely with the author on Apple’s smart sales channels as Android clearly lacks the marketing and luster of Apple retail stores. But Honeycomb just came out, and has yet to reach its full potential. To use the author’s own analogy: Apple may be in the lead, but the Android team is only now truly taking the field. It’s way too early to call the game. This post sounds more like the ramblings of an over-enthused apple fanboi fresh from the iPad2 announcement and less like level-headed analysis.

  • Mark Fuqua

    When the Mac first came out it was the leader…the one to beat. But Microsoft came out with a much cheaper OS and let any manufacturer put it on their machine. Then microsoft made it easy to create software for windows, very much the wild, wild west.

    Windows 3.1, 95, millennium, xp, vista, 7…all better than Apple…wait that’s not true. Apple has always had a better more polished OS. And without the ipod, iphone and ipad, they would not be anywhere near to 5% market share.

    Android is free and open. It will be in phones, appliances, tablets, car entertainment systems, security systems, you name it. If Apple stays its course, Android will win in the end…especially in a Global market where price really starts to matter.

    Apple’s phone and tablet are the best…but so was Mac and it lost.

  • http://www.joewikert.com Joe Wikert

    I bought an iPad the day it went on sale last year. I’ve also owned an iPhone for 3 years and enjoy using both devices. That said, I’m considering a jump to Android this summer.

    Why? I assume once Honeycomb takes over and enough Android tablets are out there we’ll see a number of them that are much lower-priced than the iPad. Also, everyone I know who uses an Android phone loves it, including a few who switched from iPhones.

    Given all this, I’m not convinced Apple will always be the leader here. I’m also not wowed by iPad 2. Would I prefer an iPad 2 over my original iPad? Sure, but I can’t justify paying the upgrade price for what is really a 1.1 or 1.5 product. I’m glad Apple is doing this minor upgrade since it gives me more time to consider that Android decision this summer!

  • http://polop canttell

    that pic is awesome!!!!!!!!!!!!!!!!!!

  • http://www.unicornlabs.com Mark Sigal

    @Brent, my point about running up the score is not that it’s game over, but that people who equate this to the smartphone don’t realize how big Apple’s lead is, yet Apple is nonetheless not losing focus. They are trying to crush any aspirations of the competition, which is one reason you saw Samsung honestly re-think their positioning today.

    @Devon, my point is not that the tablets are simply media devices, but rather that that is the table stakes for such a device, whereas the tables stakes for a smartphone is a phone. Absent a credible media strategy, which no android device has shown, despite the runaway success of iPod touch, I am skeptical that Android tablet have the necessary table stakes to be successful, and it’s not like there is great trust in media circles with Google.

    @Mark, to your point in looking at history, the past decade has been marked by iPod (still no viable competitor), iPhone (a seriously viable competitor in Android, but still the lion’s share of profits to Apple) and iPad (already at version 2, with the Android forces barely at version 1). You are encouraged to check out my piece: Five reasons iPhone vs Android isn’t Mac vs Windows (http://oreil.ly/b6EIWI) for why this isn’t Mac v. Windows redux.

    @Joe, it’s interesting that you are both a satisfied customer of multiple devices by Apple AND looking to switch.

    Call me a simpleton, but when I find products that deliver as promised that I am satisfied with, I am generally pretty loyal to them, if for no other reason that the grass is always greener, until it’s not.

    That stated, your core assertion that Honeycomb and OEM diversity equals lower prices for equal or better quality than iPad assumes that vendors buying LESS volume than Apple can price better (or care less about margins) and/or that Apple will leave pricing overhang for the competition to outflank them.

    The pricing overhang factor, in particular, is something that Apple has repeatedly said they will not leave exposed, having learned the lessons from the past.

    The absence of a carrier subsidy is far more material in pricing and sales of this class of device than many/most realize, save for Motorola and Samsung, who are learning this truth the hard way as we speak. And in a not so unrelated example, RIM’s VP of Marketing just quit on the fortnight of the launch of their tablet, PlayBook.

  • http://ipad2blog.com/ Danilo Boen

    If there is one device that can replace your ever reliable laptop, it is none other than iPad 2. Sure Motorola has come up with something like the Atrix but I still believe that in terms of portability and specs, Apple iPad 2 is still the smarter choice. I can’t wait for this device! Job well done Steve Jobs and the crew.

  • http://technotropis.com Ajeet Khurana

    Wow, the comment storm (and tone) on this article is unusual. Clearly Apple has become more of a “religion” that has “followers.”

    Compared to this review and the ensuing comment-war, my own review of the iPad to is rather tame:
    http://technotropis.com/ipad-2-looks-to-improve-on-the-original/

    Mark maybe you should run a new article review the iPad 2 smart cover :)

  • http://www.brianshall.com Brian S Hall

    I think it goes beyond execution problems. Android tablets will *never* be as good as the latest iPad:

    Google is an advertising company. That is how they make all their money. Tablets are a secondary source of revenues, at best, and always will be. They will never give the tablet its due. Not so with Apple. Because of this, iPad will always be superior to the latest Android tablet.

    http://brianshall.com/content/android-tablets-will-never-be-good-ipad

  • http://www.advancedwebads.com/sc/164 Randy Addison

    Actually, I agree with the last comment. Well, if we look at it, the latest iPad released by Apple is still far better than the latest Android tablet released. Apple is dominant in any way and in every way.

  • Fletcher T.

    I thought the rumors of the iPad mini were hilarious. On a serious note, what competition? I mean really, from a consumer point of view it feels like the only tablet out there is the iPad. Of course that is not the case, but that is just how it feels because there is nothing bigger than Apple products at this point in time.

    Fletcher T.
    email marketing solutions | email marketing services

  • http://www.notesark.com iphoned

    @Devon

    >>My GTablet, which was bought last Christmas, outperforms every bit of hardware even in the iPad2.

    Yes, those Viewsonic tablets are taking the market by storm. iPad is clearly doomed.

    Here is a quote from one of the Amazon reviewers:

    **
    In the end, a sudden thought came to my mind: “why am I wasting my time playing with ROMS and testing this crap for Viewsonic, for my own hard-earned four hundred dollars? Instead of simply enjoying a tablet experience?”
    I packed this one up, and returned it to the brick-and-mortar I got it from.
    **

  • Ryan

    Hi Mark,

    I agree with your point that, in terms of discretionary buys, the iPad is much more like the iPod than the iPhone (or Mac).

    But, on a more trivial note, I must say I’m flummoxed by your use of ‘flummoxed’. It’s not clear to me that you’re using it correctly…

  • http://teapartynews.us David H Dennis

    Why would Steve Jobs keep on improving his tablet even when the competition is laughable?

    Because he loves to do it, and because he wants us to buy a new iPad every year, or at least every other year.

    I don’t think he has the deep-seated sense of insecurity Microsoft does, or that the anti-Apple brigade here thinks he should. But he loves creating new tablet devices, and Apple fans love to buy them.

    End of story :)

    D

  • Ananth T Sarathy

    Here is where I think that Apple dominance theories are flawed:

    Unlike the iPod, whose continued dominance has a lot to do with iTunes use for MP3 (people are somewhat loathe to change to something else) and built in support iPod in things like cars, stereos, etc, Tablets won’t have that same amount of lock in. Secondly, the big players are not avoiding the product line like Sony did with MP3 due to other business considerations, allowing Apple to be the Player.

    As far as price/performance today the iPad is winning. You can argue the Xoom performance is close to iPad2, though the lack of 16gb entry point is baffling. But in 6 months, when new tablets come out with the next Tegra chip, screen tech/ resolution, better camera, etc, the iPad 2 will be behind, just like the iPhone 4 is now behind when it comes to phones like the Atrix, and they won’t be ahead again until the next iPad which we will probably be 1 year from now. In the meantime, price will fall for the competitors, and the older versions without the new specs will be cheaper than the iPad2 while the newer better specs android tablets will be the same price points.

    Now Apple may still win and be the dominant player, but I think it’s more likely that they end up with a healthy 30% of the market for tablets, but an immense ammount of profit.

  • Matt

    “Android is free and open. It will be in phones, appliances, tablets, car entertainment systems, security systems, you name it. If Apple stays its course, Android will win in the end…especially in a Global market where price really starts to matter.”

    God, you Olde Tyme folks just don’t get it.

    Microsoft didn’t win because they were “free and open”. The entire notion is just ludicrous. MS won because they had a model that generated more *profit*. Not a thing more complicated than that.

    If Google can’t make money real money on Android, it doesn’t matter how much market share they end up with. Windows was dominant because it made *lots* of money. Android makes zippo and I seriously doubt Google will ever be able to leverage enough ad sales to ever challenge Apple’s profit dominance.

  • Grover

    @Devon

    Yeah, aside from the fact that you either got a heck of a deal, or aren’t being entirely honest about price, the GTablet is very poorly made, both in hardware and software. The software is bad enough that it’s taken as a forgone conclusion that you’ll have to install a different version of the OS on it. And for $100 more (or even the same price if you’re happy with a first-gen) you can have an iPad that actually works.

    I agree completely with the author that people underestimate the lack of quality media playback on Android. I’m still, after all this time, waiting for an Android phone that will allow me to seamlessly listen to music, take a phone call, and go back to music without having to switch apps manually. A number of folks I know with Android phones still carry a separate iPod. It’s insanity.

  • Thor

    Apple haters like AppleFUD will never get it. The tablet market is not the PC market, where corporate purchases drive the majority of sales. Apple never had above a 20% share of the PC market, even in the early days of the Mac.

    I remember when Dell was going to start making a music player. One tech pundit proclaimed that the iPod’s market share would soon dwindle to 5%. Dell lasted about a year. Then, the arrival of Microsoft’s Zune would DOOM Apple. If Bloomberg is right, the Zune is going bye-bye.

    How could this be? Two reasons. First, Apple’s pricing made it hard for anybody else to get traction. Second, Apple had the advantages of a fully-integrated system: hardware and software working seamlessly.

    The claims that Android-based competitors can seriously undercut Apple in price, without major sacrifices in quality, are simply misguided. Where are they going to get cost savings that Apple can’t achieve? Apple has massive scale. The teardowns show that the Xoom costs probably $40 to build than the iPad.

    Everyone was saying that the original iPad would cost $1,000. When it came in at half that, pundits were stunned. Microsoft cancelled the Courier project. HP dropped plans for a Windows slate. There is still nothing that matches the combination of quality and price in the iPad, and Apple will have room to reduce the price when the time comes.

  • Walt

    @Apple FUD

    Which of the following facts are you failing to understand:

    1. Over 100 MILLION iPhones have been sold – name me a single Android powered smartphone that has sold even half that many.
    2. Apple gets around 50% of the profits made on ALL SMARTPHONES. How’s Motorola doing these days?
    3. Apple sold 15 MILLION iPads in just 9 months last year.

    As for your “statistic” that “News today shows that 99.7% of the population does not own a smartphone or table” (sic) I suggest you get some toilet paper and wipe off your hands, given where you pulled that statement from.

    Lastly, please, PLEASE do not read Mark’s entire post if it is draining your IQ. Based on your comments you are already flirting with negative numbers in the IQ department.

  • David Chu

    Any commentor that retorts with spec comparisons doesn’t understand what’s going to be important in the post-PC world. The post-PC world is anti-geek. It’s about computers that have enough power to last a full day and are easy to use.

    That said, I don’t think a lot of the commentors understand the gravity of the situation and why the tablet market will be different from the phone market. In the phone market, carriers hold the power. If they don’t want to support your phone, they don’t have to. Carriers also don’t want any single platform to dominate their network. It takes away their leverage during negotiations. That is why iPhones are sold at 55% gross margins. The lack of control equates to greater risk for Apple and henceforth requires greater margins.

    In the tablets market, Apple doesn’t have their hands tied. Their gross margins are between 30-40% and that’s after leveraging huge economies of scale. Most manufacturers shoot for 30% gross margins. There just isn’t a lot of room for them to play with against Apple when they are producing maybe 2 million units.

    So the idea that you will have cheaper honeycomb tablets is only likely if the tablet screen is smaller or if they use second tier components. That’s the definition of flummoxed.

  • JC

    I’d like to make an obvious point here.

    Namely, that each rollout of a ‘product type’, has had it’s own unique characteristics of market performance.

    PC’s – Apple and Microsoft. Microsoft wins big, for a few different reasons – one being opennes of development, licensing, in a mode that fit for businesses, especially. In a sense the needs of big business, outweighed the needs of consumers. Apple also rode out their fat profits, when Jobs left. Also, cheaper was ‘good enough’, and when cheaper is the different between 500 and 1000, people will go for the 500.

    Ipods. Lots of predictions here, that the Ipod would suffer the same fate as the apple computer.

    this didn’t happen. Both the Zune and the Sandisk music players, they DO compete on price, and software. But no 3rd party to get in between the user and the product. As well, the price difference was negligible.

    But since this was a strictly ‘consumer’ purchase, apple has kept something like 70% market share, for 10 years.

    Iphones – this market is similar to computers, in that there is an ‘interlocuter’ between apple and the consumer – the carrier. Because of this, google was able to push out their products, and the carriers embraced it, which has led to a surge in android phones, especially considering that the phones can compete (are good enough). Again though, Iphone stays in the mix, because of the ‘rightness’ of the product, and not a big pricing gap.

    Ipads – what will happen here? More Ipod, more iphone, or more computer?

    Well, what has made a difference prior?

    Price? This made a big different for non apple vendors, when it came to computers. But when the price is negligible, the quality of the product favors apple. As show by Ipods. Now, if someone comes out with a ‘good enough’ tablet that is $200, $250, then this will have an impact on consumers. But so far this isn’t happening.

    3rd party between product and consumer? The jury is still out on this – it looks like there will NOT be a 3rd party between. People will buy tablets ‘naked’, for the most part, without a contract. And these will be everywhere, so the built in branding of a Verizon, won’t come into play (vendor neutral).

    this also favors Apple

    Application freedom – the quality of Apple’s ‘walled garden’, has already proven itself in the Iphone. So either advantage Apple, or, neutral.

    I think the only opportunity here, is going to be on price. Because otherwise, the market is more similar to the IPod market, than to the Iphone or computer market.

    Right?

  • Crawdaddy

    I can see where the author is coming from. I’m not sure I’d use the term “running up the score” but I will say that Apple isn’t ceding anything either. I think Apple caught a lot of people off guard and it’s going to take a while for everyone to catch up. Actually catching up may not even be right… more like settle in with their take on tablet computing.

    What I really find interesting is how Android users, followers, etc. love to claim fame to Android being “open.” I certainly don’t dispute that since Google is happy to let anyone and their brother use the OS as they see fit and that’s the rub. Once Google lets the OEM’s and the phone carriers have their way with Android it’s anything but open. I’ve never seen such a mess.

  • http://www.unicornlabs.com Mark Sigal

    @Ryan, extreme whiplash from readers of this column who well understand my mis-appropriation of the english language. ;-)

    @Ananth, I wouldn’t suggest that this is game over or winning takes all; just that Apple has built a spectacular position that the competition has platform, channel and pricing challenges to meet. As to the six months theory, Apple has already shown that they aren’t sitting on their hands. To assume that someone else’s gen 1 will be better than Apple’s gen 2 is to give the unproven competition way too much credit. As to iPad not benefitting from the iTunes lock-in, I categorically disagree. This is a primary “job” of this type of device.

    @David Chu, great comments. People give conventional wisdom way too much credit, when it’s often just lemming-like sensibility.

  • Hamranhansenhansen

    > well then why do they only have 5% of
    > the computer market?

    This little thing called the IBM business sales monopoly which turned into the MS-DOS monopoly which turned into the Wintel monopoly is the main reason for Apple’s low PC market share.

    Even so, Apple actually has 90% of the high-end PC market, which is the only segment where they currently compete, and they are by far the most profitable PC maker.

  • kevin

    @Ananth: I think you need to do more research, as you’ve missed a few things that have changed over the last decade.

    On stickiness (or lock-in): All content (music, video, apps) from iPods and iPhones carry over to iPad. The dock connector remains the same. I’d venture that the iPad is even more sticky than the earlier products.

    On price/performance: Apple is getting by far the lowest component pricing on flash RAM, displays, and CPU/GPUs (which are the most expensive components in the tablet) due to high volume buys and early capital investment. Apple’s OS costs are spread among iPhone, iPod, iPad, and Mac, so its not huge for iPad. Apple is keeping the retailer cut for itself by selling iPads largely through its own physical and online Apple retail stores. At $499, Apple is making a reasonable profit. At $499 for its competitors, most are just breaking even. The competitors may design higher performance tablets but they won’t be able to sell them for less and still make a profit.

  • Ananth T Sarathy

    Is the primary job for a tablet really to work with itunes? Other than for music where is the the benefit to that? And while it’s nice to have your music on your tablet, that’s not the same thing as having your music in your pocket on your phone. Apps don’t need itunes. Web doesn’t need itunes. Video can need itunes, but it shouldn’t for things like netflix/hulu/ youtube, or even the digital copy of a movie your bought. Now, an iPad needs iTunes because apple wants it that way, but itunes doesn’t have the user base for video that it has for music as most video is from the web or included with a copy of purchased media, and therefore a tablet just needs a way to sync files, which you can do with an SD card. W

  • http://www.unicornlabs.com Mark Sigal

    @ananth, first and foremost is the point that the ipad is akin to having a mini HD TV in front of your face so video content and a richer realm for the same app model that has proven so compelling on iPhone and iPod touch.

    More to the point, once you’ve embraced the iTunes model on your Mac, PC, iPhone, iPod touch or Apple TV, it’s effectively free on your iPad. Think: Apps, Personal Media, Hollywood Media (Music, Movies, TV, etc).

    That leverage and favorable gravity is pretty potent when you consider that there are already 200M people with Credit Card-backed Apple IDs one click away from this goodness.

    Whether in your definition of the world iPad NEEDS this or that is irrelevant. Apple has built it, nailed the end to end, and it’s proven across geographies, device types, content and application types.

    The dogs are eating the dog food, and coming back for seconds and thirds in the Apple Universe.

  • Ananth T Sarathy

    @Jason
    I don’t disagree that the iPod/iPad dock works the same and there is some stickiness, but my point is while it’s convenient to connect your phone/mp3 to the built in connector in your car, but are people really going to NEED to be able to connect their tablet to their car stereo? I imagine they would just use their iPod. Home stereo is different case, but most of the connectors to a stereo/receiver are a dock not just a cable, and an iPad wouldn’t fit. But that’s what airplay/dlna is for.

    I do also get the Apple has a huge economy of scale advantage, and their profit is higher (though not a lot if you take the iFixit component cost break down). Where Apple get’s the advantage is that they sell the product for more to the retailer, or through their own retail channel, thus keeping more the actual sale price for themselves.

    Again while it’s possible for Apple to be the dominant player, I just don’t think the iPod analogy works, as the iPod/music player are different than tablets, which are trying to replace computers..

  • Ananth T Sarathy

    @Mark
    I wasn’t arguing whether iPad Needs, I was saying whether a tablet (generally) needs this. Apple, of course wants to use iTunes and leverage it 200 million users, but if tablets are going to be the new paradigm of computing, the 200m number is nothing. Will the iTunes ecosystem be a compelling reason to choose the iPad for those who haven’t embraced Apple? That’s where the battle will be. Those people will be sold on price/performance, which why I think apple will have a healthy market, and huge profits, but will not the majority of market share. But time will tell.

  • Dale

    On a quick skim, I believe others have pointed to the fact you still need to hook an iPad up to a computer to sync it and put content on it.

    That’s the biggest thing holding the iPad back from encroaching on PC territory. Once they have it all wirelessly synced to the cloud and self-sufficient, it’s on.

    I also agree with Mark, while all of the rivals are getting the hardware side of things right, they’re relying on Google and the Android Marketplace to provide the experience. They don’t seem to be considering and selling the overall package the way the iPad does.

    Even with the first generation, people could look at the iPad and know how it might apply to their life. With the Android tablets, I haven’t seen any compelling content or applications to show me why I need one.

    It’s not sucking Steve Jobs’ d**k to point that out. Apple are responsible for hardware and software, and thus do a better job of thinking about the start to end experience.

  • NoodlesNoodlemann

    Of course Apple is not going to maintain it’s 80-90% share of the tablet market. There will be competitors and the anti-Apple types and geek types will buy them. But I think they will continue to control the market until and unless someone can leapfrog them somehow with some killer feature/apps, etc. It’s possible that may happen, but I sure wouldn’t bet on it. Xoom can’t even get Flash to work. Most people want something that just works. Which is what the iPad does. Apple will cede the geek market to the other manufacturers.

  • Alan

    iPad is tethered to iTunes and who on a PC wants that?

    What if iTunes is in The Cloud and not on your PC? Problem solved in the very near future.

    Those comparing Apple’s 5% PC verses Microsoft’s 95% PC numbers forget that a tablet is really a consumer product at this stage of the game. Apple is at about 20% in the first world consumer PC market. Macs are a big deal for consumers.

    iOS has been worked on since about 2002. It was first designed for tablets and later reworked for phones. It is years ahead of Android. Google is an advertising company. They sell advertisements. They could care less about the user experience of Android devices.

    In a consumer environment, sooner or later, Android is destined to fail.

  • Alan

    iPad is tethered to iTunes and who on a PC wants that?

    What if iTunes is in The Cloud and not on your PC? Problem solved in the very near future.

    Those comparing Apple’s 5% PC verses Microsoft’s 95% PC numbers forget that a tablet is really a consumer product at this stage of the game. Apple is at about 20% in the first world consumer PC market. Macs are a big deal for consumers.

    iOS has been worked on since about 2002. It was first designed for tablets and later reworked for phones. It is years ahead of Android. Google is an advertising company. They sell advertisements. They could care less about the user experience of Android devices.

    In a consumer environment, sooner or later, Android is destined to fail.

  • gtablet?

    you mean that thing that got yanked for being a faulty piece of crap?

  • Synth

    No one has even come close to refuting Mark’s arguments.
    Let me simplify.

    1. Android has no smart sales channel, sort of like Apple back in the 90s. Remember when Macs (non-functioning) would sit on the back shelf at Sears? That’s Android in 2011. Every sales guys at almost every retail outlet is going to push the iPad, not the Xoom. Just look at Verizon, why were they willing to sell iPads with no CDMA chip and no two year contract–right in front of the Samsung Galaxy tab?
    2. Android doesn’t do anything better for 90% of consumers, especially on a slate.
    3. It costs more.

    I would add that this time Apple does not face the artificial, technical and telco limitations that cell phones have and Android tablets can’t hide behind the price-subsidy voodoo that cell phones enjoy.

    And please don’t bring up the PC-era. The issues were completely different in every way. Apple is a completely different company and the 2011 mobile space is completely different from the 80s and 90s PC space.

  • Daniel

    @AppleFUD,
    Nice to know you are keeping it civil. Well if you do read the comments, you might have gleaned that everyone here disagrees with you. Your not the first and won’t be the last to spread FUD as all trolls do. But let’s get to some of your nonsense,

    Fans of iPad, care to tell me how many there are? Are you saying that only a small segment of the population will buy whatever Apple puts out. How many ‘fans’ become what the general public really wants? With 15 million iPads sold, I would say that it’s more than just ‘fans’ who are buying the iPad. I would bet that iPads would sell over 30+ millions iPads this year, with 70% of the people being new to the iPad. That would put the figure close to 50 millions so called Apple ‘fans’ in less than two years.

    Apple has never ever dominated the PC sales, and were never number one. At their best of time Apple reached around 20% market share for PC, then dropped down to 2%. They have since climbed back up to 10%, with a growth every year for the last 5 years! Of course that number changes when your looking to spend over $1,000 on a laptop, which then Apple owned 90% of that market.

    There is one thing I know everyone can agree with you, and that is the iPad is proprietary to Apple only. That is either good or bad, depending on your needs. If you want no support and can handle technical issues, then an Android device may be an option. As you are seeing now with the iPod, iPhone and now the iPad, these devices are reaching out to a larger group of people who are interested in computers but were intimidated by computers large learning curve. Apple’s new devices have eased those concern, and as a result Apple has seen a HUGE spike in sales/profits for 19 straight quarters. Your comment about the OS is silly. The iOS is from a family of OS X. The benefit of this is that it allows Apple to really code to one line (unlike MS, which has multiple different OS from their Desktop, xBox, WindowsMobile, WP7), allowing them to scale the OS to meet the hardware, which is something I have often complained that MS should do. It also allows them to take the best part and bring it up or down to those devices. So no, there I disagree with you.

    Your follow up about not being the market leader is falling on deaf ears. Apple has learned it’s lessons from the 80′s-90′s. The iPad being priced at $499 (for the 16gb) was way below what anyone expected to the point where all the competitors had to start from scratch. No, this is not your Fathers Apple that you see now.

  • Mike

    I’ve really enjoyed reading this discussion.

    I used to avoid Macs because I felt they were overpriced, and I was too accustomed to Windows. But I was one of those who was gradually won over, starting with the iPod, then iPod Touch, then iPhone, and finally a Mac Mini. Once you become fond of the Apple aesthetic and approach to usability, it’s easy to become attached.

    The customer service doesn’t hurt either. The other day I was in an Apple Store (seeking an iPad 2 to no avail), and I showed them my frayed 2 yr old headphones, and they replaced them on the spot: The customer service is amazing. I can go online and have them call me within 1 minute. I don’t mean to gush, but I haven’t experienced that anywhere else (besides Amazon – they have great customer service too, in my experience).

    I also find that their products are competitively priced these days. Consider the Mac Mini. I can get a computer for less, but not one with the same reliability, customer service, etc.

    Regardless of how you feel about the iPad, you have to admit that the Motorolla and others are borrowing A LOT from Apple’s innovation. The Xoom is very clearly inspired by the iPad. That’s not a bad thing, but it’s weird that people will hate the iPad, but sing the praises of tablets that have borrowed so much from Apple.

    If Apple hadn’t started this craze, we’d probably be looking at the same bulky convertible tablet/laptops that preceded the iPad. Similarly, our smartphones would probably look more like Blackberrys, or the ugly, complicated phones that they sell in E. Asia.

    That’s why I love Apple: For advancing the state of our tech, and introducing a new standard in usability. We’re becoming a population where carrying around a slim, intuitive, capable tablets is commonplace, just like in a sci-fi movie. THAT’S what I love about Apple. If another company takes the ball and runs with it, surpassing Apple’s contributions, even better.

    In 5 years, my tablet of choice might be running Android, or it might be the iPad 7 – I don’t really care. I’m a fan of any company that makes technology more awesome and accessible for me. That’s why I love Apple’s contributions. It doesn’t mean that I’m a drooling fanboy or have lost my ability to view Apple with a critical eye.

  • Mike

    Sorry for all the redundancy and general low-quality writing above – I accidentally submitted before I had a chance to revise. I tend to just let my fingers fly, and then go back and turn it into something readable :)

  • David Chu

    Forget the arguments of cost or number of apps. Let’s just focus on if Honeycomb will ever be able to match the iPad in quality of software.

    With Honeycomb, Google releases the software to the manufacturers who pick the hardware and then do the systems integration work (write the drivers, etc.) and then they insert their custom code so that they can differentiate their tablet from other manufacturers.

    The moment Google releases honeycomb from their hands, you are introducing several points of failure because you have people less intimate with the inner workings of the OS stitching together the product.

    I’m more critical of Google’s choice of strategy than an iOS VS Android argument.

  • JRock

    Steve readily admits that the Macintosh had a 10 year lead on everyone and let that lead slip to Microsoft. Apple will not cede to complacency with the iPad. If a company wants to compete with the iPad, understand that Apple has best hardware, software, price, marketing, selling channel, apps and ecosystem. Good luck.

  • chano

    @ Ananth T Sarathy [16 March 2011 11:07 AM]

    Is the primary job for a tablet really to work with itunes? Other than for music where is the the benefit to that?

    Ananth, listen carefully, cos I’ll say this only once buddy.
    Say goodbye to everyone you know, and take a weekend off to roam the iTunes Store. DO NOT go to the music sections.
    Take a helicopter-view look at the 300k+ apps.If you in closer, you’ll never come out again…as in Hotel California..
    If you’re in the USA, skim the movies and TV choices.
    Then surf the vast array of quality podcasts.
    Get the picture?
    There is more, but I’ve kept the best till last.
    Spend the whole of Sunday immersing (as in put your head under the surface too) yourself in iTunes University. This is the true hidden gem in iTunes. Browse away Ananth. You may never break surface again. Take a look at philosophy. Learn drumming with Little Kids Rock. Taste Indian Music with the UK’s Open University. Learn to write apps for Macs or iPhones with Stanford University. Learn to speak French or master French cuisine. The list is endless.
    Your friends and family will put out a Missing Person APB on you after a week or so.
    Enjoy it Ananth.
    And do try to get out more my friend.
    Best

    Chandra Coomaraswamy
    London (as in England)

  • Henry 3 Dogg

    @walt

    “2. Apple gets around 50% of the profits made on ALL SMARTPHONES.”

    Sorry Walt, but you understate this.

    Apple gets around 50% of the profits made on all MOBILE phones. Not just the smart ones.