mobile devices

Cheaper tablets mirror smartphone race to the bottom

The Globe and Mail

The new Nexus 7 tablet is demonstrated during a Google event at Dogpatch Studio in San Francisco, July 24, 2013. The race to dominate the tablet market is beginning to look like it could hinge on one thing: price. (BECK DIEFENBACH/REUTERS)

The race to dominate the tablet market is beginning to look like a replay of pricing shifts that allowed Apple’s competitors to narrow its lead in smartphones.

As Google Inc. unveiled the latest version of its flagship tablet this week, Apple Inc. revealed that sales of its iPad products have stalled. Nexus, a seven-inch device that runs on Google’s Android operating system, will be priced at $229 (U.S.), about $100 cheaper than the iPad Mini, and goes on sale next week in the U.S. first. Google has yet to confirm worldwide release dates.

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Nexus is the most recent of a slew of new devices powered by Android. The availability of cheaper tablets that can do many of the same things the iPad can have slowly chipped away at Apple’s market share.

The company remains the single biggest player in tablets. According to research from the International Data Corporation, Apple controlled 39.6 per cent of the worldwide tablet market in the first quarter of this year. However, Apple held 58.1 per cent of market share in the same quarter last year. The decline comes as a number of Android tablet-makers are seeing their share of the market grow.

As it did in the smartphone market, Google hopes to win the tablet war with sheer volume. But growth in the sector is happening slowly, and so far, the iPad has been able to easily withstand challenges from the likes of Microsoft Corp., BlackBerry Ltd. and, to a lesser degree, Samsung Electronics Co. Ltd. Apple’s early lead has “given it a first-mover advantage that’s proving harder to overcome by the Android hordes,” says Tony Cripps, principal analyst with London-based consultancy Ovum.

But unless the tablet market has already reached a saturation point, Mr. Cripps sees an outcome that’s in many ways similar to what happened in the smartphone market.

“Eventually, we’re looking at Android tablets overtaking iOS ones.”

The first half of 2013 has seen a flurry of activity in the tablet market. Samsung, perhaps Apple’s strongest competitor in the mobile device market, is in the middle of releasing myriad makes and models of Android tablets designed to bridge the size and functionality gap between smartphones and laptops – many of which are priced lower than Apple’s offerings.

At the same time, Microsoft recently undertook a massive $900-million write-down on inventory of its Surface tablets, and BlackBerry announced it will no longer provide significant updates to the PlayBook. As a result, the vast majority of consumer tablets sold in the last year have run either on Apple’s iOS operating system, or Google’s Android.

In many ways, the tablet market is beginning to mirror the smartphone one, with sales of Android-based devices coming close to eclipsing the more profitable Apple tablets, leaving a number of other competitors fighting for third place with little success.

There are several reasons – unique to the form and function of a tablet – that make the market challenging for late entrants looking to gain a foothold. For one thing, most tablets fall broadly into one of two size categories – seven or 10 inches. And although companies such as Samsung are introducing other screen sizes, few other form factors have gained any traction with consumers, either because the size is so small as to resemble a large smartphone, or so big as to be cumbersome.

Users also appear to use tablets overwhelmingly to consume, rather than to create content. That has made it much more difficult for companies that specialize in productivity tools, such as Microsoft and BlackBerry, to make the case for a similarly focused tablet.

“If the tablet was being used as a PC replacement, we would have seen a potential entry point where a new entrant could come in,” says Duncan Stewart, director of technology, media and telecommunications research at Deloitte Canada. “Since that didn’t happen, most people who buy tablets already have PCs, and want tablets to be good at tablet-type things.”

The first-mover advantage in the tablet market is also arguably more insurmountable in the smartphone industry because of the way consumers purchase the product. Whereas a significant portion of smartphone customers (particularly in North America) purchase their devices from carriers, tablet users generally buy those devices from retail outlets, without a wireless plan or a subsidy. As such, carriers are largely unable to give tablets “hero” status and influence purchasing decisions.

“The ability of carriers to be intermediaries in the tablet market is minimal,” says Mr. Stewart.

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BLACKBERRY CUTS JOBS

BlackBerry Ltd. has laid off about 250 of its employees at its headquarters in Waterloo, Ont., as part of its latest move to trim costs, the smartphone maker said on Thursday.

The company, which last year cut thousands of jobs, recently hinted that more reductions were in the offing. Last month, BlackBerry reported dismal quarterly results, which triggered a 28-per-cent plunge in its share price. The employees being laid off were part of the new product testing unit, the company said.

BlackBerry recently said it no longer planned to migrate its new BlackBerry 10 operating system across to its Playbook tablet. Many take this as a sign that BlackBerry plans to phase out the poorly received device. It sold only 100,000 Playbooks in the last quarter.

The Canadian Press

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