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Apple Shifts Tablet Strategy?

July 18, 2012 | About:
Muhammad Bazil

Muhammad Bazil

3 followers
The No. 1 tablet manufacturer Apple (AAPL) may begin a new course in its role in the tablet battle for glory. According to a new report the company is hard at work on a new tablet with a 7.85-inch screen. This is likely to be priced to compete head-to-head with Amazon (AMZN)’s Kindle Fire, and Google (GOOG)’s Nexus 7, less than the current $499.99 price tag of a new retina iPad.

The report goes on to say that the plan is part of a larger textbook strategy the company has been planning for some time in grade schools. Back in April, the company unveiled a drag and drop-based book editor titled iBooks Author. The announcement, however, had no larger impact on the textbook market, or even urged schools to adopt the new platform. A new shiny tablet, with a cheaper entry price might just be the ticket.

A smaller iPad may also appeal to users who avoid carrying their current iPads around because of size, as it does not fit in the typical woman’s purse, and pockets are out of the equation. A similar occurrence happened when the company announced the iPod mini in order to compete with rivals Sony (SNE) and Microsoft (MSFT), which later prompted the announcement of the iPod Shuffle that started at $49. It was enough to maintain 80 percent of the music market and leapfrog the brand into the highly competitive tablet and mobile markets with dominance; it might just do it again.

The previous CEO of Apple was adamantly against the use of a smaller screen having an interesting choice of words:

“There are clear limits of how close you can physically place elements on a touch screen before users cannot reliably tap, flick or pinch them,” Steve Jobs said. “This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.”

However the report goes on to note that the first Apple prototype, according to an unnamed source, had a 7-inch screen. But Steve Jobs was famous for making quick changes and throwing away old concepts in a flash. Another theory is that he was intentionally trying to create a diversion for people. I don’t count myself among that group though.

Nokia Cuts Lumia Price

In a surprise move this weekend Nokia (NOK) announced that it would cut the price of its Lumia 900 smartphone to just $50 from $100 for AT&T. The move, however, is not expected to agitate Apple. But the already fledgling RIMM (RIMM), after the company delayed the Blackberry 10, and cut 5,000 employees, might delay the new phone further.

The Lumia was also recently left behind by Microsoft and their choice not to upgrade the phone to the new Windows 8 operating system. While the phone will still be getting Windows 7.8 and a home screen that kind of looks like Windows 8, the move did upset Nokia stock holders. The good news is that Nokia is already used to dominating affordable handsets and maybe they can set that trend for the smartphone market too.

The move does signify a growing rift between Apple and AT&T (T) over subsidy anxieties and the cost of carrying the iPhone. No doubt AT&T is working to build an inroad in weakening their reliance on Apple’s iPhone, which currently has impacted the carrier’s operating margin. AT&T posted a 28.7 percent EBITDA compared with the previous year of 36.7 percent; the reasoning given was that Apple sold twice as many phones. Of course over a two-year contract the remainder is made back in profit and many customers choose a carrier based on whether they have the iPhone, which is why Sprint (S) started carrying it.

Analysis

Apple has a strong base to build on. So let’s not let it go, just yet. Investors are already betting on the company receiving a $910 per-share price. Sales estimates for the second quarter could be as high as 25 to 28 million devices sold. As the company battles with newly sustained weaker competitors, Nokia and RIMM, they are expected to continue to swallow large portions of the mobile handset market share. Buy.

About the author:

Muhammad Bazil
Muhammad Bazil is a financial journalist and editor for a variety of websites, public policy organizations, and book publishers. He has written hundreds of published articles and blog posts on topics including budgeting, credit management, real estate and investing. His articles have been featured on the homepage of Yahoo!, MSN and numerous local news websites.

Rating: 4.3/5 (3 votes)

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