Home/Blog/Trading Ideas/After Fossilizing the PC, Tablet Makers Take On Each Other

After Fossilizing the PC, Tablet Makers Take On Each Other

26 October 2013 in Trading Ideas

It seems almost quaint, those innocent days of 2010, when Apple first introduced the iPad and some thought the competition against “netbooks” was on.

Ahem.

Three-and-a-half years later, the stakes could not be higher for tablet makers as consumer demand continues to ramp up. Research firm Gartner says about 120 million tablets were shipped in 2012, nearly seven times as many as in 2010.1

You may need no other perspective than to know that IDC is predicting that sales of tablets will surpass those of PCs in the fourth quarter of this year – and on an annual basis in 2015.

That sort of demand has also largely helped the stocks of makers of tablets and their components. The Tablet Takeover motif has gained 19.5% in 2013. The S&P 500 has gained 22.4% during that same time.

Tablet Take Over MotifThe motif also has gained 5.9% in the past month. OK, it helps when half of the weighting of the motif comes from two stocks – Google and Apple – that have just increased more than 11% in the past month.

On the other hand, Apple is as Apple does, so to speak, and the phenomenon of shares of the iconic iPad/iPhone maker rising in the weeks before a product refresh announcement (like last Tuesday’s) is nothing that any veteran investor can claim they haven’t seen before.

And Apple continues as cock of the tablet walk: iPads had the largest share of the world tablet market in the second quarter with 32%. However, the No. 2 tablet maker, Samsung, is quickly gaining, with 18% of the market now, up from just 7.6% a year earlier.

Apple also is trying to stay atop a market that is increasingly more fractured, as the New York Times pointed out, amid new product launches this week from Apple, Microsoft and Nokia.

Microsoft is mostly going after professionals by offering tablets that also double as PCs. Samsung sells many tablets to cater to different professions and interests. And Apple markets its iPads as versatile devices that can be used for both work and play.

Meanwhile, Amazon offers low-priced tablets to get people to buy content from its stores – one of several cheaper tablets that have emerged to challenge the iPad.

Not that every tablet has succeeded – just ask BlackBerry, or Microsoft, for that matter, which eventually took a $900 million write-down on unsold inventory of its early-entrant Surface tablets from last year.

As the Times notes, one strategy for wannabe iPad-killers is to determine why its owners use the devices so much. According to research firm Gartner, 80% of people with iPads use their tablets at least 10 times a day, much more often than people with other kinds of tablets.

Annette Jump, research director at Gartner, told the Times, “Other tablet providers need to understand why owners of their tablet spent significantly less time on their devices.”

One wonders if PC makers even pondered this question before it was too late.

1Brian X. Chen, “Tablet Makers Gear Up for Latest Skirmish,” nytimes.com, Oct. 20, 2013, http://www.nytimes.com/2013/10/21/technology/tablet-makers-gear-up-for-latest-skirmish.html.

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