Provided by the Business Insider:
Apple's iPad 2 isn't a massive advance over the first iPad, but with hardware, software, apps, distribution, and pricing combined, it is still by far the best tablet on the market.
Despite recent announcements from Google, Motorola, Samsung, HP, and RIM, we still expect Apple to dominate the tablet market for years.
While competition will intensify, the iPad will continue to be the best all-around product for consumers, and therefore Apple should maintain very high market share (settling to 50%-60%) for at least several years.
Click here to flip through the tablet players one-by-one to see how we think they'll do
As we said last month after our initial analysis, in the long-term, we don't think the tablet market will be as lopsided as the MP3 or PC markets, where a lone platform (iPod, Windows) annihilates everyone else. But we also don't think it will be as evenly distributed as the smartphone market, where no single platform has more than about one third of the market.
But, you may say, Google Android just kicked Apple's butt in smartphones! Why won't this happen in tablets?
The fundamental difference between the tablet market and the smartphone market is carrier distribution.
Whereas smartphone distribution is dominated by wireless operators, we expect carriers to play a relatively small role in tablet distribution. Tablet sales will be centered around electronics retail -- the Apple store, Best Buy, Walmart -- and big e-commerce, and not around carrier stores.
In mid-January, we asked Business Insider readers, "If you were going to buy a tablet, where would you buy it from?" Only 6% said they would buy from a carrier retail store or website. Meanwhile, 51% said they would buy it from an Apple retail store or Apple.com -- where they only sell iPads. Another 24% said they would buy from Best Buy, Walmart, other retail, or associated e-commerce.
(That is, in part, because we believe that most people will not want to sign 2-year wireless data contracts for tablets, and therefore won't care as much about carrier-subsidized pricing. So while carriers have taken it upon themselves to start supporting tablets like crazy, we don't think they will ultimately do much of the tablet selling.)
So let's walk through the typical tablet-buying routine.
If you go into the Apple store, you know what to expect -- big tables with iPads laid out to play with. Either you'll buy one or you won't.
In a Best Buy or Walmart, we assume you'll see a shelf with iPads and a few other tablets set up for demo. The iPad hardware and software will likely be nicer than the competition, and if the salesperson is trained, they'll be able to explain that Apple's apps and media ecosystem is still the best. (Apple should continue to have the best commercials and marketing, too.)
Then it will come down to price.
We believe Apple will continue to price the iPad aggressively so it does not lose this market to cheap, inferior competitors.
It may not immediately be as profitable as some of Apple's other businesses, but we believe Apple knows how important the iPad is to its future, and how much of a head start it has. So we don't expect Apple to allow any company to significantly underprice it. (Here are more details about how Apple can price iPads so cheaply.)
And by making smart supply chain decisions, like investing $4 billion in displays in advance, Apple should be able to keep its costs in line to support these pricing decisions -- offering not only a better product, but a better value than its competitors.
With these factors in mind, within a couple of years, we expect Apple to maintain the lion's share of the growing tablet market -- settling at least somewhere in the 50% to 60% range -- with Android next, and the rest splitting the difference, including RIM's PlayBook/QNX platform, Palm's WebOS, and whatever Microsoft eventually brings to the game.
The big question on our minds right now is whether a separate market for "business" tablets opens up, versus "consumer" tablets, and whether Apple will perform as well for those corporate customers.
Apple simply doesn't have the direct enterprise sales that HP, RIM, and Microsoft do. Will that market be large and significant enough to shift the balance? Will a HP or RIM device become the tablet equivalent of the ubiquitous Dell PC workstation? Or will Apple's superior hardware and development tools help it keep its lead?
Click here to see how Apple and its challengers will do individually
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