With rumors that Apple will be launching a 7” version of the iPad to challenge Samsung and Amazon dominance in that class folks are starting to ask about Microsoft 7” tablets.
What I think is interesting is that 7” has been a dead zone for products but then, anything below 13” and above 3.5” was a dead zone for everything before the iPad and the latest mass of 4”+ smartphones which are taking massive share from the now too small iPhone (Apple is expected to announce a 4” class product in a few weeks).
In short as consumer a class opens up when some vendor presents a compelling product in it and the 4”+ Android Smartphones like the new stunning HTC One are vastly more capable than what came before and the iPad, well it was magical.
However another interesting aspect of this latest change is that Amazon really broke the 7” class with the Kindle Fire (and they are expected to have 3 new Kindles in this class shortly) and Samsung, HTC, and LG opened up the 4”+ class. Nokia, with the Lumia 900 got in on this but Microsoft’s new Surface Tablets don’t fall in this size range and Apple isn’t leading in this move, they are being dragged in late.
Microsoft and Apple Ex-Market Leaders?
Both companies at one time were thought of as market leaders. Microsoft fell off this wagon first when Apple took back the PC initiative in the Smartphone (basically a handheld PC) and tablet segments. I think you could argue it was wasn’t just that they lost these segments but that they are no longer perceived as leading in technology that hurt that company’s performance over the last decade and they are clearly playing catch-up with the Surface Tablets. They did jump back for a moment with Xbox Kinect but as we move to this next wave of products people are asking whether they will see the 7” opportunity (if there really is an opportunity) or be late again.
Apple is the bigger problem the iPods have lost emphasis and much we stopped talking about them even before we stopped talking about Kinect. Emphasis moved to the iPhone but currently it is being ranked far below some of the larger phone products noted above and in the recent Consumer Reports dropped well out of first place and into last or next to last in the category. Whether you consider Tablets to be small PCs, or big iPods, Apple was the gold standard but it is Samsung’s 7.7 and the Amazon Kindle fire that dominate this emerging class and while Apple is coming they are clearly no longer driving the tablet segment. Even with their Retina Display Samsung was arguably first on tablets with their high res 7.7 though I think you could still argue Apple led since they put it on their iPhone first.
So, given Microsoft really isn’t considered a leader in personal technology anymore, and Apple is largely considered THE market leader this problem could be more pronounced near term for Apple though both firms will struggle if they don’t get or retain some leadership aspect in the market.
Apple has moved from product class to product class but, with the iPod, they had already established leadership in with the iPhone before ramping back and they continue to lead that old MP3 player market even though they appear to have stopped investing in it. When they moved to the iPad hey started losing leadership with the iPhone and their leadership in that market is clearly being disputed. With the iPad they following into the 7” class and the next product class they will lead has not yet been established.
But the trend is clearly working against them because they appear to be increasingly losing leadership closer and closer to the time when they take over a new segment. This puts much more pressure on them, not as if it was low pressure to begin with, to move aggressively into the new segment.
If Apple TV rumors are correct this new segment is the Apple TV and the TV segment has been tried unsuccessfully by Dell, Gateway and HP. This is not to say Apple can’t be successful but that it will likely be far harder (with Samsung already dominant in this space which has very tight margins) than the iPod or iPad were, or about as difficult as the iPhone was. And the iPhone was likely Steve Jobs biggest personal Apple effort.
Wrapping Up: Steve Ballmer and Tim Cook’s Test
So I think what makes this all interesting is that Windows success likely will be tied very closely to how it does on tablets and for that it must assure it is on the size that is most popular in the 4th quarter. That size may be 7” and if Windows 8 fails Steve Ballmer may be asked to step down. Tim Cook, with Apple TV, has a Steve Jobs’ like effort and if he falls short his tenure at Apple may be cut short as well because, without market leadership, Apple’s valuation should drop like a rock. So both CEOs have something in common this year they both need successes in critical personal technology products in very different areas. Steve needs success in Apple’s tablet space and Tim needs to again put Apple where Sony used to be.
That should make for a very interesting battle this 4th quarter.
President and Principal Analyst, Enderle Group
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