Anytime I think of the decision by Hewlett-Packard Co. (NYSE: HPQ) to exit the tablet PC market, I recall the story of the disappointed gold prospector who sold his concession only to find he would have struck the mother lode had he dug just three feet farther.
A similar situation may be developing in the tablet market. Many OEMs have crowded into the market, eager to replicate the wild success Apple Inc. (Nasdaq: AAPL) experienced with its iPad. Countless companies like HP, Research in Motion, Motorola Mobility, Samsung Electronics, HTC, and Barnes & Noble are hawking tablets but have not made a dent in Apple's marketshare. The only company that has experienced surging demand for its tablet is Amazon.com Inc. (Nasdaq: AMZN), which will become the No. 2 seller by the end of this quarter, according to iSuppli Corp.
What's the secret sauce? I can think of two lessons companies can draw from the story of our disappointed gold miner. First, many of the OEMs in the tablet market lack an understanding of the sector, having plunged in only because a competitor redefined the sector and ignited huge growth. It's easy to forget that Apple didn't create the tablet PC -- it offered a vibrant ecosystem in conjunction with application developers to support the product. But Apple wasn't the first to introduce a smartphone or tablet. Both products existed long before Apple rolled out the iPhone and the iPad. What Apple did was offer products that got consumers and enterprises excited.
Further evidence of Apple's impact on the tablet market emerged in a report that IDC released today. The research firm said businesses in Europe are eager to deploy tablets for enterprise use. IDC forecasts sales in the EMEA area will surge to more than 20 million this year. Tablet sales in the first nine months of the year rose to about 12 million units, and consumers and businesses will buy more than 8 million in the last quarter of the year, the report said.
IDC's explanation of why enterprises are "keen to deploy tablets" is very illuminating about the impact Apple has had on the sector:
More than 22% of businesses think that the present generation of tablets defined by Apple iPad are more suitable to their needs (for example, meter reading, inventory management) rather than their present equipment, such as traditional tablet devices or vertical application devices...
Tablets are perceived as perfectly well suited for several key vertical applications such as:
- Equipment maintenance, meter-reading (water, gas, electricity), proof-of-service in the field service category.
- Asset and inventory management, telematics and direct store delivery in the storage and logistics, travel, and distribution verticals.
Basically, businesses believe the current generation of tablets is more utilitarian than the predecessors. Apple obviously blazed the trail, but many of the products introduced later by competitors have been disappointing. IDC questioned offerings from Apple competitors: "Do vendors have a clear business strategy, robust products and solutions, competitive pricing, and a focused vision to target and address commercial needs?"
From all I have seen so far, the answer is a qualified yes for some and a jangling no for others. Amazon is doing fine, but the performance of other players stretches from subpar to mildly hopeful. Motorola Mobility and Samsung are still in the game, though both are locked in patent wars with Apple. HP has crashed out of the market, and RIM is an example of the walking wounded. (The company's BlackBerry PlayBook crashed, and it recently took a hefty $360 million after-tax writedown on its tablet inventory.)
Which brings me to the second lesson companies can get from the experience of our failed miner. It's good to know when to cut losses, but giving up without fully exploring all possibilities or supporting a product with the right resources is a worse strategy. A mining engineer contracted by the new miner to review the "failed" mine reportedly suggested a little more digging. And that was all it took to turn the site into one of the more profitable finds of the year.
Were HP's TouchPad and RIM's BlackBerry PlayBook doomed to fail? What could the two companies have done to turn these tablets into winning products? Suggestions are welcome.