Friday, August 12, 2011

What I Read Today - Friday August 12, 2011

From:  The Wall Street Journal

Tablet War Is an Apple Rout


People don't have tablet fever; it seems they simply have a mania for iPads.

The latest evidence: Hewlett-Packard Co. is dropping the price of its TouchPad tablet by 20% little more than a month after it hit stores, as the computer giant tries to goose sales of its answer to Apple Inc.'s iPad.

H-P, Motorola Mobility Holdings Inc. and Research In Motion Ltd. have all jumped into the tablet market this year, trying to close the gap with Apple.

The electronics giant created a multi-billion-dollar business last year when it launched the iPad—and has since seen its profits and market value swell as others have tried to keep pace.

Rivals have been routed so far. Motorola cut the price of its Xoom tablet after its February launch, released a cheaper model and warned shipments will decline this quarter. RIM's PlayBook was delayed until April and still isn't being offered for sale by the two biggest U.S. wireless carriers.

Samsung Electronics Co., which was the quickest to market an iPad rival and has shipped millions of tablets based on Google Inc.'s Android software, is now embroiled in a patent dispute with Apple that threatens sales of its Galaxy Tab in most of Europe.

Apple, meanwhile, says it is having difficulty keeping up with demand and selling every iPad it can manufacture. Five months after its release, its iPad 2 can be hard to find in retail stores. The company said it shipped 9.3 million iPads in the June-ended quarter.

An Apple spokeswoman reiterated an earlier comment from Chief Financial Officer Peter Oppenheimer, saying the company is "thrilled" with the iPad's momentum.

The consumer electronics giant has sold 28.7 million iPads since it was first launched in April 2010. Estimates of Apple's share of the tablet market vary but some researchers say it has about two-thirds of shipments, though they acknowledge it could be higher.

One sign of Apple's dominance: Rivals discuss how many tablets they are shipping, but don't disclose how many units are actually being purchased by customers. Motorola says it shipped 690,000 Xoom tablets since its launch in February, and RIM says it has shipped 500,000 PlayBooks between their April launch and the end its first quarter in May. Motorola and RIM declined to comment.

Samsung, which in January said it had shipped two million Galaxy Tabs to wireless carriers and retailers around the world since its release in September, has stopped disclosing shipments all together.

As some industry watchers put it: There are more iPads rival tablets sitting in warehouses and stores than current demand for those products, and that's prompting manufacturers to cut prices to move inventory.

"The numbers that we have reported are probably higher than what have actually been sold to customers, which is why you see companies like H-P trying to lower prices to move what's in the channel," said Tom Mainelli, an analyst at research firm IDC.

On Wednesday, H-P cut the price of its entry-model TouchPad to $399.99, so it now costs roughly $100 less than a comparable iPad. The TouchPad runs the webOS operating system created by smartphone maker Palm, which H-P acquired.

H-P took its time developing the device, and Chief Executive Leo Apotheker promised the TouchPad would be "perfect." Reviewers didn't feel that way. They complained about sub-standard hardware features and glitchy software.

Stephen DiFranco, a senior vice president in H-P's computer business, said in an online message Wednesday that the lower price will allow "both HP and our channel partners to be even more price competitive in the marketplace."

An H-P spokesman declined to say how many TouchPads have been sold, saying the company "continually evaluates pricing for its products."

H-P's price cut also marks a shift in strategy. Samsung tried to outmuscle the iPad with beefy processors but keep prices in line with Apple's machine. Motorola priced its Xoom, the first to run a tablet version of Android, at a premium to Apple's iPad—and was later forced to cut prices. RIM priced the PlayBook like the iPad even though its seven-inch screen is smaller.

Analysts say H-P is now conceding the obvious: consumers won't pay the same price for an imitator, even a well-appointed one, as they will for the original. That has left the market for tablets split in two.

"There's an iPad market," said Tim Bajarin, an analyst at Creative Strategies, "and then there's everyone else."

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

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