In reading comments around the Web it's clear the Apple iPad is as misunderstood as it is already successful. The Apple iPad isn't designed to compete with laptops. It is designed to compete economically with netbooks.
Microsoft and the Windows PC OEMs are challenged by commodity-grade pricing on netbooks and shrinking hardware margins. Although netbooks are creating unit sales gains for the PC industry, they are not producing sufficient margins to satisfy Microsoft's goals for Windows licensing revenue growth and, because of low retail prices, are not satisfying the gross margin desires of the hardware OEMs.
The Apple iPad has already cut the underpinnings of the market for the Kindle DX. No doubt Amazon will retool the product, add functionality and most likely adjust pricing, the market for the Kindle DX is essentially gone.
The iPad is aggressively priced based on its specs. Just ask the executives at Acer. That company has chosen not to pursue entry into the tablet market following the release of the Apple iPad. Without the prospects of continuing revenue for the device through app and content sales, attempting to compete with Apple in the tablet market doesn't make economic sense for the company. This from the fastest growing PC maker on the planet and a leader in netbook sales.
While Microsoft and some Windows PC OEMs are now touting tablets as the next market for product sales, monetizing that market following the original hardware sale is a problematic issue.
Witness the dramatic falloff in market share for Windows Mobile smartphones following the ascent of the iPhone, aggressive pricing by RIM on the Blackberry line and the release of Android OS-based phones. The much-hyped Windows Phone that will appear late in the year will not be compatible with existing Windows Mobile apps. Microsoft is starting over in developing an eco-system to support the Windows Phone.
The Apple iPad is about economics, not hardware. Deliver all the Windows-based tablets that are being mentioned around the Web and without a means to monetize the products following the original hardware sale they will deliver nothing to the manufacturers in terms of revenue growth and rising margins. Slap Windows 7 on a tablet and all one gets is a product to compete with other Windows 7 hardware devices and nothing to expand the eco-system for developers.
There's nothing in the market now that will compete effectively with the Apple iPad and the Windows PC OEMs will not be able to deliver a competing product anytime this year. It's not about the hardware. It's about economics and the ability to monetize products after original sale.
Based on reported pre-order volume, the Apple iPad is already achieving sales success. For now the Windows PC OEMs don't have an answer and slapping Windows 7 on a tablet is about as underwhelming as it sounds. It will deliver nothing in terms of aggregate revenue and earnings growth for the OEMs and at best only trade revenue between product lines. More products without a net gain in sales.
The Apple iPad is designed to compete economically with netbooks while building demand for apps and other content available through iTunes. With iPhone OS-equipped devices already approaching 100 million unit sales, the iPad will enhance the appeal of iPhone OS devices and most likely create a halo effect for sales of other Apple products.
The Apple iPad isn't designed to compete with laptops. It's designed to economically compete with netbooks and deliver avenues for monetization of the devices following the original sale. This is about economics, not hardware. For Windows PC OEMs looking at the tablet market, without a robust channel for app and content sales tablets represent nothing but a zero-sum game.
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