Boy this certainly sounds dangerous given how many people are lined up to buy this product at the moment and how well it is selling—but that is apparently the stance Craig Mondie took when he was speaking in Australia recently. Taking what appeared to be a similar position is what seemed to cause AMD’s board to fire its CEO and head of Strategy. But, as incredible as it may now seem, they may be right.
Recall that a few years ago Palm was at the top if its game and the PDA was largely where the iPad is, and now even finding a PDA on sale is virtually impossible. Not only is the Palm Pilot gone, Palm itself has vanished into the archives of history and that all mostly happened within a five year window. The Rise and Fall of Palm may be a template for the iPad.
Part of what analysts do is take a possible future as a given and work back from that to determine whether the outcome is likely. Let’s do that with the iPad.
There is no Tablet Market
If you look at the tablet market and take away the iPad it is pretty small. The Samsung Galaxy Tablet sold about 10 percent of what was shipped to stores last year and enjoyed a 16 percent return rate from disappointed customers, the Motorola Xoom is underperforming as well though we don’t yet have numbers and return rated were estimated at a whopping 20 percent which is unsustainable. I think you could argue these two products are largely drafting the iPad given these numbers and that suggests that there isn’t a tablet market, there is an iPad market which could evolve to be another iPod market which is very profitable and owned by Apple or a Palm Pilot market which is absorbed into something else and becomes obsolete.
Death via Redundancy
The Palm PDA line was made largely obsolete by the smartphone, led by the Blackberry and slam-dunked by the iPhone. In fact, if it weren’t for the cost of a data service the iPod market would likely be just as obsolete for the same reason. It was Apple’s anticipation of this that drove them to the iPhone and allowed them to continue to do well as the next wave took off.
The underlying problem is people don’t like to buy and carry redundant devices and if they have an iPhone and an iPod or a PDA they will, and did, get rid of the redundant device. This turned out to be bad news for Palm. But it could turn out to be bad news for the iPad as well.
The iPad has a number of advantages which are driving it into the market as a more portable replacement for the laptop but it could still be displaced by a more capable laptop doing similar things. The iPad leads on weight and battery life but lags on total capability and its lack of an outdoor viewable screen makes it a poor eReader. By the end of the decade, it seems likely that one device will step in and do the work of all three and much like the smartphone took out the PDA, a lighter notebook with 10 hours of battery life could render the iPad redundant. Should that notebook get an outdoor viewable screen and should smaller eBooks like the original Kindle drop below $100, the iPad could be put under enough pressure to become the redundant device.
Laptops are already drifting above 10 hours and they are getting ever thinner and lighter with the ARM and Atom based Windows 8 products expected to be within range of the first iPad. Outdoor viewable screens have been more problematic but ePaper is dropping in price and Amazon is rumored to be looking at a new Kindle that could price below $100 and might even be free to heavy book buyers.
Wrapping Up: Steve Jobs
So a scenario that could make the iPad obsolete requires notebooks to become weight and battery life competitive at similar price, this points to the iPad coupled with near free eBook readers or outdoor viewable screens on those same notebooks. This is actually very likely by 2015 and with the expected departure of Steve Jobs, who uniquely puts a huge focus on marketing and demand generation, when Apple’s ability to create excitement around an increasingly redundant product will be reduced. The combination should result in the outcome Craig Mundie forecasts. I’m not saying this will be the outcome, I’m just saying this is how I’d explain what would have to happen if this was the outcome.
Right now there is no tablet market outside of the iPad and it does seem doubtful that a product so similar to a laptop could become the next iPod—particularly without Steve Jobs. If the iPad is really just a crippled laptop with more battery life and a lighter weight, it could be gone once laptops move to match its capability. We clearly aren’t there yet.
President and Principal Analyst, Enderle Group
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