This
article originally appeared on TheStreet.com.
At Apple Investor News we track all
the Apple newsflow, and it’s clear the media hype, fanboy blog rumors and
analyst chatter about an impending Apple tablet is fast approaching the
anticipation that preceded the iPhone. Once it is officially announced (early
2010?), the hype will then kick into the stratosphere.
I think the expectations for the
iTablet are running too high, especially with investors who seem to be
inferring a potential iPhone-like sales hit. Here’s why that will not happen.
Tablet PCs have been around for a
decade and have never been more than a small niche seller for users with
specialized needs. For that targeted audience, tablets are a laptop
alternative, not a separate product category.
Herein lies the key question that
will determine the potential success of this product: Will the iTablet be a
product that a user would buy in addition to a laptop?
Like most users, I need a laptop
either as my sole computer or as a second computer to do real work (writing,
spreadsheets, presentations, etc.) on the road. I also need a smartphone for
voice and email checks. For me, both products happen to be from Apple.
So if Apple produces a tablet
product that turns out to be a winner, I would certainly buy it -- but only
as a replacement for my laptop, not in addition to it.
This assumes it has full Mac OS
functionality and at least a 10-inch screen. But if the tablet turns out to be
just a larger iPod Touch or iPhone, it would not be a laptop alternative and
therefore not a viable purchase for me and, I suspect, for many others.
So there’s Apple’s challenge: make a
Tablet Mac and you risk cannabilizing existing Mac laptop sales; make a larger
screen iPhone or Touch, and you’re asking people to buy a third device that
would duplicate, albeit in grander fashion, the functionality they already have
in their existing, but must-have, laptop and iPhone (or Touch).
Then there’s the potential that this
product will have built-in 3G service, which creates another hurdle: asking
people, who probably already own or will soon buy an iPhone, to pay additional
wireless service fees. This is not something I want or need.
And what if, as the latest rumors
indicate, the iTablet is designed as an e-book reader (an alternative to the
Amazon Kindle and others), but with the added functions of web browsing, email
and the array of apps available though the iTunes Store? Could Apple break open
this exciting and growing market and do for books what iPod-iTunes did for
music? If anyone can accomplish this, it’s Apple. But I don’t think lightning
will strike twice. Once again, this could be a great product, but not a
must-have product.
(FYI: Electronics analyst firm iSuppli
estimates 3.5 million e-readers will be sold worldwide in 2009.)
Apple enjoys an enormous amount of
press, blog and analyst coverage. This is a blessing any company would envy.
But sometimes it can be a curse, when expectations run too high, and each
product announcement is expected to include an iPod- or iPhone-like hit. Such
could be the case with the Apple Tablet.
So my prediction: Apple will indeed
create a fabulous tablet device that will sell quite well. It will provide a
strong incremental boost to Apple’s existing portable line, not so shabby when
you consider the Mac’s growing market share and popularity of the MacBook and
MacBook Pro line. But it will not be a mega-seller like the iPhone or iPod.
Whenever this “disappointing” news
becomes apparent to the market, use it as a buying opportunity for a stock
that, regardless of its tablet sales, is firing on all cylinders for its core
product categories.
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Full disclosure: Frank Cioffi is
long on AAPL.
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