Despite mixed reviews and a version of Android (s goog) “not optimized” for tablets, Samsung sold 600,000 Galaxy Tabs in its first month, and recently claimed to have sold a million. If Steve Jobs isn’t concerned by those numbers, he should be. It was a just over a year ago the Motorola Droid (s mot) launched with Android on Verizon’s (s vz) network, and we all know how that turned out for iPhone (s aapl) market share.
Setting aside the expected iPad 2 improvements, a faster CPU, more memory and storage, cameras, Apple needs to look at what the competition is doing today and tomorrow. With a yearly release schedule, Apple needs to match the Android tablets of 2012 in 2011, but first needs to look at 2007.
Past Mistakes and Future Connectivity
The first step in preventing Android world domination of tablets is not to repeat mistakes made with the iPhone. In 2007, Apple launched the 8GB iPhone at $599, only to drop the price $200 two months later. In 2010, the iPad launched the 16GB Wi-Fi iPad for $499, and nine months later competitors like Samsung are struggling to match that price point with smaller tablets. Lesson learned, Apple.
Unfortunately, Apple is still learning the hard way about carrier exclusivity, since the iPhone is still exclusive in countries like the U.S., though that’s expected to change soon. Likewise, the iPad 3G only works out of the box with AT&T (s t), though this is mitigated by mobile wireless routers which allows the Wi-Fi version to theoretically use any network. An extra dongle, however, is a very un-Apple solution. In contrast, the Galaxy Tab is available on all four major U.S. carriers with built-in connectivity.
Apple needs to match that kind of accessibility and take it a step further, making 3G standard on every iPad sold. If this can’t be done without raising prices, the increase should be minimized, as market share matters more than margins with a new platform like tablets. Let Samsung try to compete with a $529 3G iPad that works with any wireless data provider.
At the last conference call, Steve Jobs attempted to dismiss tablets with 7-inch screens as being unable to “compete with iPads.” Nearly a million Galaxy Tab owners would seem to disagree. Jobs also asserted there were “clear limits” on how small and close elements could be on a display, and yet more than a hundred million iPod touch and iPhone owners seem to be doing just fine.
What Jobs should have said was, “a 7-inch iPad would put downward pressure on iPod touch and iPhone prices, and we don’t want that.” Nonetheless, Apple needs a 7-inch iPad to undercut an expected deluge of Android competitors, perhaps at $349 for an 8GB model, $399 for 16GB. If it becomes necessary to to sell the 8GB, 16GB, and 32GB iPod touch at $199, $249, and $299, then so be it. The Galaxy Tab has already proven 7-inch tablets sell, and the RIM PlayBook (s rimm) is next. A 7-inch iPad would provide a smaller, lighter iOS alternative, and one that should be more than price competitive with Google and RIM offerings.
If it seems difficult for Steve Jobs to put out a 7-inch tablet after dismissing them, that’s nothing compared to allowing Flash (s adbe) on iOS tablets. Steve Jobs has said Flash hurts battery life and performance, causes crashes and has security issues, but if Flash is so terrible, then why not make it incompatible with OS X?
It’s because Flash is expected on a “traditional” computer. On handhelds and tablets, Apple hopes to keep such expectations from ever developing. That seems unlikely. Flash is or will be everywhere, except iOS. Can you imagine people switching from PCs to Macs and finding out Flash doesn’t work and there’s nothing to be done about it? That’s what will increasingly be happening with handhelds and tablets as they become just another computer.
The iPad needs a computer, a proprietary cable, and iTunes for syncing content and software updates. The Galaxy Tab at least can do OTA updates, though it still requires a cable with a proprietary 30-pin connector for some syncing. Presumably, webOS (s hpq) tablets from HP will be more advanced OTA devices in 2011, as will future Android tablets. This is where Apple really needs to go with the iPad, making it a computer unto itself. If a cable connection is needed, it should use the new MicroUSB standard instead of the proprietary dock connector.
If it sounds like I’m saying Apple needs to make a lot of concessions regarding its current ideas around tablet design, it doesn’t, so long as the company is happy with a minority (if highly profitable) share of the tablet market. Of course, a plurality, or even majority, could pay more in the long run, but that requires paying more attention to the competition today, and down the road.
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