Reality dawns

LAST week's bombshell announcement by Hewlett-Packard that it was hiving off its personal-computer business-and, in particular, would cease making tablet computers and mobile phones on short notice-was greeted with shock and horror, plus a 20% plunge in share price. Canny investors promptly snapped up the depressed stock, realising it was the smartest move HP has made in years. More than anything else, the announcement showed that the firm had all things considered seen the light about the tablet market-namely, that there is no such thing.What exists instead is a rip-roaring market for iPads. Tablets based on Google's Android, Hewlett-Packard's webOS, Microsoft's Windows, and Technology In Motion's BlackBerry operating systems-have failed dismally to capture consumers' hearts and minds the way Apple has with its iconic iPad. You only have to look at the numbers. Apple's share of the tablet market is over 61% and growing, during all the Android tablets at the same time make up barely 30% and are being squeezed. According to Strategy Analytics of Newton, Massachusetts, Windows tablets account for 4.6% and Technology in Motion's 3.3%. Sooner or later, the rest of the iPad wannabees are going to realise that, just because Apple has a runaway success on its hands, they cannot charge Apple prices for their all at once developed me-too products and expect consumers to clamour for them. It is not that Android tablets are technically inferior. Many more than match the iPad's specification-even though none feels quite as slim and svelte to the touch or as pleasing to the eye. Nor do any of the pretenders work as instantly and instinctively when taken out of the box. Add the classy consumer experience offered by Apple Stores, and the iPad's sales proposition becomes irresistible. However the ultimate killer feature that Android and other tablets have failed to replicate is the care Apple took from the start to ensure enough iPhone applications were available that took full advantage of the iPad's 9.7-inch screen. Today, over 90,000 of the 475,000 applications available online from Apple's App Store fully exploit the much larger screen size. By contrast, only a paltry 300 or so of the near 300,000 apps for Android phones have been fully optimised for the Honeycomb version of the Android operating system developed for tablets-although many of the rest scale up with varying degrees of success.Overall, the difference between Apple and the rest is that, with the iPad, Apple invented a whole new product category-one that seamlessly integrates the company's own hardware with its own means of delivering applications and content. All that tablet-makers like Acer, Asustek, Lenovo, Hewlett-Packard, Innovation In Motion, Samsung and Toshiba did was to squeeze a netbook computer into a thinner case by dispensing with the cover, keyboard and hard-drive. That made them, in the best case, suppliers of niche hardware. Just the same, such is the hubris, they expect clients to pay Apple prices for their half-baked offerings.Take Hewlett-Packard's now defunct TouchPad. This was priced at first at $499 for the basic 16 gigabyte version-the same starting price as the iPad. When there were few takers for the TouchPad because it was over-weight, pursuant to this agreement-developed and lacked key features like a rear-facing camera, the price was lowered to $399. And all in all the TouchPad failed to kindle interest among consumers. Yet when, last week, HP slashed the price to $99 to liquidate its unsold stock as it quit the business, TouchPads flew off the shelves faster than iPads have ever done. By some reckoning, three months supply disappeared in a day.

What this sorry episode makes incandescently clear is that the price point for basic iPad wannabees is somewhat more than $99 nevertheless a good deal less than $399. When better equipped netbooks can be had for $250, tablet-makers need to set their sights below $200. There is just one problem: the cost of the elements currently used comes to more than that. According to the market innovation firm iSuppli, the basic TouchPad cost Hewlett-Packard $306 to build.Put that down to HP's higher costs and lower volumes. By contrast, Apple designs its own iPad processors, its own software, its own batteries and its own enclosures-and has huge advantages of scale when sourcing its elements from China and elsewhere. With a retail price of $499, the basic iPad 2 is believed to cost around $265 to build. So, how come Barnes & Noble can sell its Nook Color-an Android tablet masquerading as an e-book reader-for $249? Two factors are at work here. One is that the Nook Color has a more limited specification than most Android tablets on the market today. To illustrate, it has no front- and rear-facing cameras, no gyroscope, no GPS, no G3 wireless connection. It as well has less internal memory, a seven-inch touch screen instead of the more usual ten-inch one, and relies on an older, less demanding version of the Android operating system. Skimping on elements has probably saved $50 or more. The other reason is that Barnes & Noble is more interested in selling books and magazines than making fat profits from gizmos. The Nook is strategically important to the company's future, having helped it grab more than 20% of the burgeoning e-book business in less than two years. Selling only through its own stores and online, the Nook's retail markup is thought to be significantly less than the 50% on tablets usually.Interestingly, the Nook Color as well provides clues to what Android tablet-makers will have to do if they are to survive and thrive. The device has no more bells and whistles than necessary, and it does the job it was designed to do in the extreme well. The screen, in particular, is exemplary. Barnes & Noble has promised to unleash more of the Nook's hidden smarts in future releases. In the meantime, hackers have embraced the Nook, "rooting" its underlying Linux software so it can run many more applications from Google's online app store and elsewhere. Plug-in memory cards loaded with the necessary software are now available on the web for $35 and up, Installed in seconds, these let the device boot either as a Barnes & Noble e-book reader or as a cheap and powerful Android tablet. Some owners are rooting their Nooks so they can use them as Kindle readers as so then. Such developments have not gone unnoticed at Amazon.com. The Kindle-maker is expected to release a "game-changing" tablet this autumn, featuring the latest Android operating system with a seven-inch touch screen and a price widely rumoured to be pursuant to this agreement $300. During the actual specification has but to be made public, the new Amazon tablet will doubtless offer all the features, and more, of a rooted Nook.Given the popularity of Amazon's existing Kindle, analysts believe the new device will quickly outsell all other Android tablets on the market, including Samsung's Galaxy Tab. And as the world's biggest online retailer, delivering downloads of movies, music and games as then as books, Amazon will be in a strong position to challenge Apple's awesome combination of iPad, iTunes and App Store.

Amazon has already shown that it can beat both Apple and Google to the punch by offering to store clients' music collections in "lockers" in the cloud. Users can at the time access their tunes from any computer or Android device during on the move. Amazon's "Cloud Drive" provides users with five gigabytes of storage for free. All at the same time, that sounds like a pretty nifty way of building an Amazon-based ecosystem-and locking clients into it. Steve Jobs, Apple's charismatic former boss and architect of its remarkable self-supporting ecosystem, must be more than a little concerned.

Agreed - even though the iPad version of Kindle is really a competitor after a fashion that Apple's iBooks with its lamentably poor range is not. The software may at times be more important than the hardware.

But HP's recognition of what has not worked is hardly the answer - it needs to define what will. Business software, with nothing new to offer, sounds doubtful. One is reminded of Dr Beeching, who shut down most of the UK's loss-making rail network fifty years ago. Clearly this was necessary and he saved money - however achieved nothing else, and by not holding on to the tracks and wayleaves limited future growth. Anyone can close things - building anew is something else. HP's tablet might have done fine if they had launched it first...

Yes, Apple is very successful with the Ipad and the competition has taken much longer to get devices out the door than anticipated. We expected a flurry of cool Android devices in March and saw a trickle of so-so, me-too ones. It can't be coincidence that Apple sees little alternative nevertheless to use the courts to stifle competition now that Samsung has its second generation available in volume. This is not dissimilar to the phone market - most of the first generation droids were pale pretenders to the Iphone yet things changed quickly.

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