Pure Hardware Is Not A Viable Tablet Strategy

DIGITIMES:

Due to pure PC hardware players such as Hewlett-Packard (HP), Acer, Asustek and Dell not having any advantages to compete in the tablet PC market, sources from upstream supply chain believe these players will gradually phase out from the market with players that have strong content support such as Apple, Amazon and Barnes & Noble, to continue to compete through lowering their hardware prices.

In my opinion Apple will maintain the US$499 entry price of the iPad. There is no reason to lower it since no one else can compete at that price while garnering enough profit margins to sustain their tablet business.

Apple, Amazon, and Barnes & Noble. There are three companies but only two viable tablet strategies. One is to seed as many affordable tablets, now set at $199, as possible and sell content, lots of content. The other is to build an absolutely brilliant tablet and sell it for $499 with fat profit margins and access to tons of apps and a bunch of content.

The first strategy profits from content and those profits also need to offset all the costs associated with building and selling tablets. The second strategy generates the majority of profits, large profits, from hardware with some coming from apps and content.

To split hairs, when I say tablet I mean a tablet like the iPad and not a pre-iPad tablet. There is only one tablet option for pure hardware companies and that’s the pre-iPad tablet. Microsoft with Windows 8 and its Metro UI will pour millions to revive the pre-iPad tablet. And pure hardware players will absolutely need to jump on this bandwagon, aggressively improve hardware performance, ruthlessly slash prices, and bestow Microsoft all the profits.