>The Future of the Tablet, and It Isn’t the iPad 2

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The iPad 2 is here. It will certainly dominate tablet sales this year, but it is not the future of the tablet. The demand for Tablets is forecast to grow exponentially this year and the iPad 2 and its numerous competitors working in copycat mode are all hoping to cash in on this demand. Apple’s domination of this category, along with the historical failures by big-time competitors like Microsoft, has created a mad rush to create iPad clones. There are somewhere in the neighborhood of 100 tablets coming out this year, and most of them seem to have no better sense of purpose than to replicate the iPad. This is a doomed strategy, if it can be called as strategy at all. But the iPad and the majority of its competitors are focusing on a very narrow view of what the tablet can do.

As currently designed, tablets are basically expensive video game consoles used as a means to access the Internet, email, and books. But the true potential of the tablet is not in its ability to replace the video game console or the television. Rather, the tablet has the potential to improve our productivity. While the iPad 2 makes some strides in this direction compared to the original iPad (especially with the stronger processor), the focus of most of the enhancements are aimed at improving the entertainment value of the device.

But it is just stronger processing power along with a mindset towards increasing our capacity to do things–not just playing games–which represents the future of the Tablet. Recently, a tiny start-up company has built a tablet explicitly designed for students that just might give us a glimpse of the future. The tablet is called the Kno and it has all of the standard functionality of the iPad, such as a touch screen with the ability to rotate on demand, but it really emphasizes the ability to take notes and seamlessly integrate your own thought with the information that you are reading.

While there are numerous subtle differences in the basic orientation of these tablets, a couple of the Kno’s features are worth noting. First, the Kno comes with a pen, which is too “uncool” for the Apple but which is very handy for writing compared to the impractical touch-screen keyboard. More importantly, the Kno has a dual-screen option that really underscores the power of the device. With the dual-screen, you can truly multitask in a way that just is not possible with the single-screen iPad. Users can compare two articles side by side, perform an Internet search and take notes at the same time, and even perform analysis on one side and document the results on the other. Although the odds are stacked heavily against the Kno succeeding (despite the focus on a clearly defined market), the ideas embodied in the device will likely be used in the successful tablets of the future.

While other companies could try to leapfrog Apple in the race to the “mature” tablet, they face a company that has been wizened by failure. The big difference between Apple today and the Apple that lost to Microsoft in the personal computer market over two decades ago is that Apple allows other companies to create software–now called applications–for its device. This flexibility represents a large barrier to entry for competitors. It also represents a key to unlocking the potential of the tablet to help us become more productive. If Apple would spend more effort improving the functional ability of the iPad,enabling application developers to create apps that truly improve our productivity, then the future of the tablet will arrive that much sooner.

If not, then it is up to a competitor with enough foresight and financial wherewithal to leapfrog the iPad 2 and re-conceptualize the tablet as a productivity tool instead of as an entertainment tool. This is why the Xoom is so intriguing. Motorola and Google are two companies that have proven their ability to see around the corner and they have made it much easier for developers to get applications to market than Apple has with the iPad. However, the Xoom is really built to be another iPad with an emphasis on entertainment–as if two cameras is really the key to success in this category–which is a shame for all of us.

>JP Morgan: Apple’s iPad 2 could cause ‘bubble burst’ for rival tablets

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According to one Wall Street analyst, Apple’s soon-to-be-released iPad 2 could burst a bubble for competitors who are hoping to capitalize on the growing tablet market but remain unable to catch up.

Analyst Mark Moskowitz of J.P. Morgan Research warned investors early Wednesday that build plans for tablet shipments from Apple’s rivals may be too high, presenting “increasing risk of a bubble burst” in the second half of 2011.

“In our view, the technical and form factor improvements of the iPad 2 stand to make it tougher for the first generation of competitive offerings to play catch-up, meaning actual shipments could fall well short of plan,” Moskowitz wrote.

Using discounted build plan estimates to project tablet shipments for the year, the analyst claims that tablet makers will build approximately 65.1 million tablets in 2011. When compared against J.P. Morgan’s estimates of 47.9 million tablets sold this year, companies could find themselves with as much as 51 percent oversupply in a worst case scenario.

Apple is expected to maintain the lion’s share of the tablet market. Moskowitz estimates that Apple could see nearly 100 percent sales growth year over year, resulting in more than 29 million iPads sold worldwide in 2011.

According to Moskowitz, component suppliers could stand the most to lose from a bubble burst. “Based on our research inputs, tablet makers eager to emulate Apple’s meteoric start are trying to secure components with inflated build plans,” Moskowitz noted. “Of note, glass displays, processors, and, to a lesser extent, NAND Flash are the components that could be most at risk.”

Moskowitz has a “favorable view of Apple’s products and operating model,” but acknowledges that “Apple is not for everyone.” However, holdouts hoping for an alternative to Apple’s iPad may be “underwhelmed” by rival offerings.

“Aside from Motorola’s Xoom and HP’s TouchPad (which does not have a price tag yet), the competitive offerings appear to be light on attraction, in our view,” said Moskowitz.

J.P. Morgan maintains an Overweight rating on Apple with a price target of $450.

Initial Wall Street response to the unveiling of the iPad 2 last week has been favorable. In general, analysts were impressed by what were seen as “evolutionary” upgrades to the device and the thinner and lighter form factor. At the time, Moskowitz admitted that his firm’s forecast of Apple holding 68 percent market share in 2011 “may be conservative” in light of the iPad 2.