The iPad has been a big success for Apple (AAPL). Apple bulls dream of iPad gaining and maintaining a market share similar to iPod. As a matter of fact, this is one of the propositions underlying some of the very high targets by analysts on Apple stock.
Until now, there has been some justification for such a proposition. Tablets based on Google (GOOG) Android have not met with much success, even though Android phones are a huge success. Playbook from Research In Motion (RIMM) has been a flop. Kindle from Amazon (AMZN) and the Nook from Barnes & Noble (BKS) have sold a fair amount, but they are targeting the low end where Apple is not competing.
Now Google is ready to mount a brand new challenge to Apple. The Wall Street Journal reports that Google will open an online store to directly sell tablets potentially co-branded with Google's name.
There are several reasons behind Google tablets not catching on. Corporate buyers do not like fragmentation in the Android operating system. For background please see Amazon Kindle Fire A Blessing For Apple In Google Battle. Corporate buyers are also concerned about security issues with Android. Please see Android Security Issues Could Score Windfall For Apple, Microsoft.
Android phones are mostly popular with low end buyers. A tablet is more of a luxury compared to a phone. Even when a low end buyer wants a tablet, they go to Kindle. The point is there is no reason for low end buyers to buy a high end Google Android tablet.
It appears that now Google is ready to challenge Apple head on in the tablet market by directly selling tablets under its own name. To succeed with the corporate buyers, Google will need to provide better security, and better integration tools.
It is difficult to see how Google's online effort can succeed big with consumers because presumably consumers will want to touch, feel, and test-drive the tablet. Are Google stores next?
Google's attempt to sell its own Android phone under the name Nexus One was a failure. Presumably Google has learned from that experience.
Best Buy (BBY) is in trouble as is evidenced by their latest earnings report. Will a close alliance between Best Buy and Google on tablets become Best Buy's salvation?
Stay tuned, an interesting new challenge to Apple with significant implications for Apple stockholders is about to begin.
About Me: I am an engineer and nuclear physicist by background. I have founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. Please feel free to write me at Nigam@TheAroraReport.com.
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Full disclosure: Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, and $525.
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