Android Tablets, Take Two: All Eyes On PC Vendors, Retail Partners, Amazon

Google IO Huge Labyrinth

The first six months of the Android tablet era have been largely forgettable, as Apple (NSDQ: AAPL) continues to sell millions of iPads each quarter and enjoy near-exclusive attention from mobile software developers. As Google (NSDQ: GOOG) looks ahead to the holiday shopping season and the release of an updated version of its tablet software, it’s banking on the desperation of traditional PC makers and desire of consumer electronics retailers to make more money on tablets than they do on iPads.

By now the failures are well-chronicled: Motorola (NYSE: MMI) priced the Xoom much too high for an iPad-centric audience to take notice, Samsung’s Galaxy Tab 10.1 offered little to differentiate itself from Apple (European courts are taking a less diplomatic view), and HTC’s Flyer doesn’t appear to have even registered in the industry’s consciousness. Depending on which research firm you ask, Android partners currently hold between 20 percent and 30 percent of the tablet market, but that’s a number that measures shipments to channel partners like retail stores, rather than actual usage. You can take a look at some of these tablets and others, in our slideshow, embedded below:

Google’s own Android usage stats suggest that just over 1 percent of all Android devices in usage at the moment are tablets. With an Android installed base of around 130 million devices, that’s just 1.3 million tablets: Apple shipped (and almost certainly sold nearly all of them to end users) 9.25 million iPads in just its last quarter.

So the picture is not pretty. However, Android got off to a similarly slow start as a smartphone operating system, only to take the worldwide market share lead in 2010. While there’s no assurances that the same thing could happen with tablets, Google’s John Lagerling, head of Android partnerships for the company, is betting that Google can make an impact in tablets by continuing to improve the software and by given partners more incentive to build and promote Android devices.

Bugging out: Early decisions regarding pricing and hardware design certainly didn’t help Android tablets, but the main problem was the Honeycomb software itself. Google’s first version of Android designed specifically for tablets was a rush job that suffered from several persistent UI bugs and sluggish performance that made it nearly impossible for reviewers to recommend the devices over the iPad.

Google has promised those issues will be fixed with the release of Ice Cream Sandwich, which will unify the smartphone and tablet versions of Android and is expected to present a much cleaner take on the tablet experience. And Google also benefits from Apple’s push toward raising interest in cloud services, Lagerling said: “We’ve been doing this for almost ten years. (Cloud services are) something that’s so well integrated, over time that value will be perceived by users.”

But Google is also reaching out directly to developers in hopes of getting them to produce more, and better, Android tablet applications. It has held a series of tablet-focused Android Developer Labs in cities around the world over the last month, with a few more planned for the upcoming weeks. Those labs have allowed Google engineers to interact directly with app developers helping them optimize their apps for tablets, and have likely given Google some direct feedback about the strengths and weaknesses of their approach to tablets.

Post-PC era: Google started off building Android tablets with its smartphone friends like Motorola, Samsung, and HTC. But it has noticed greater interest in Android tablets among PC companies that are scrambling to stay relevant as PC sales continue to stagnate. Lagerling wouldn’t name names, but we’re talking about companies that have been smaller players in the PC market yet need to evolve.

“They’re proving they can do nice products at good price points,” Lagerling said. Expect Google to promote this newer generation of tablet makers more aggressively than it had in mind when it first launched Honeycomb, given that everyone has likely learned from the mistakes of the first Android tablet efforts.

Retail: Consumer electronics retailers like Best Buy desperately want to get in on tablet demand, as they’re subject to the same trends in the PC market as the PC makers themselves. Best Buy revamped its computer department to showcase tablets, but only the iPad is selling well and Best Buy is not believed to be making great margins on the resale of iPads while Apple cleans up.

Lagerling thinks that the combination of retailers looking for higher-margin products and tablet vendors eager to strike back at the iPad will ensure that Android tablets continue to receive excellent product placement inside Best Buy stores. That’s almost an essential given that companies like Samsung, Acer, and Motorola don’t have their own retail stores.

Also expect to see new tablets designed for special purposes, like gaming, that retailers will be eager to showcase.

Wild cards: There are two big developments hanging over the future of Android tablets over the next six months: Google’s pending purchase of Motorola and Amazon’s expected entry into the tablet market.

Google refused to comment on either topic for this story. It has pledged to operate Motorola as a stand-alone business, but there are an awful lot of mobile industry people who don’t believe that line and expect Google to take a more hands-on approach to tablet design through Motorola’s hardware engineers. Still, the climate for Android tablets will likely have changed one way or another by the time the deal is completed, and therefore a Google tablet might actually be welcomed in hopes of getting some sort of traction in the market.

As for Amazon, that’s a doozy. A source familiar with Amazon’s project said Google was aware of Amazon’s efforts, which reportedly involve an older version of Android with a brand-new customized user interface that bears little resemblance to the Honeycomb-based Android tablets.

The concern among some in the Android community is that Amazon’s tablets, if they prove popular, could “fork” the Android market if Amazon’s tablets can’t (or won’t) run applications written for Honeycomb or Ice Cream Sandwich tablets. It’s not clear whether Amazon cares, as it already has its own application store, payment-processing system, and e-bookstore to sustain its own little tablet ecosystem.

The source indicated that Google wasn’t that worried that Amazon would pursue the nuclear option of cutting off contact to the rest of the Android community, but Amazon’s true intentions have yet to fully emerge.

Amazon could be both a blessing and a curse for Android tablet hopes. A successful Amazon tablet could finally get application developers interested in supporting Android tablets alongside the iPad, the way they current value Android smartphone apps in addition to iPhone apps. But an Amazon tablet that struck out on its own path could prevent proper Android tablets from receiving the support they need to really challenge Apple.

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