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"Good artists copy, great artists steal." -- Steve Jobs, 1996

My readers know that I am extremely bullish on 7" class tablets. The Google (NASDAQ:GOOG) Nexus 7 is an amazing device at a great price (and it is selling like hotcakes) and the iPad Mini is a pretty great (albeit slightly more expensive) entrant from the Apple (NASDAQ:AAPL) camp that, according to all indications, is also selling like crazy (according to Apple's online store, it'd take a week to ship me one). However, doesn't it strike anybody as odd that while the iPad Mini is selling out, the iPad 4 is readily in-stock? Sure, you can come up with any number of explanations, but it seems clear, at least to me, that the Mini is vastly outselling any of the "larger" iPad products.

Now, I seem to remember the following quote from the late Steve Jobs regarding 7" tablets:

7-inch tablets are tweeners; too big to compete with a smartphone and too small to compete with an iPad ... 7-inch tablets are dead-on-arrival.

Of course, current CEO Tim Cook countered this with the following statement at the most recent conference call:

On comments that Steve made before about 7 inch tablets, let me be clear, we would not make one of the 7 inch tablets. We don't think they're good products, we'd never make one.

Sure, the iPad Mini isn't a "7-inch" tablet. It's a -- wait for it -- 7.9-inch tablet! That means Apple's innovating in a new form factor that it thought of all by itself, right? Surely it has nothing to do with the runaway successes of the Amazon (NASDAQ:AMZN) Kindle Fire or the Google Nexus 7?

See, Apple and its shareholders need to simply admit that other companies have good ideas, too. Innovation does not happen in a vacuum, and it's plain A-Okay to borrow and enhance upon broad conceptual ideas from your competitors. Apple's not selling ideas, it's selling products. Execution is really everything.

I believe that Apple made a very smart move in recognizing the success of the 7-inch form factor tablet and then taking the concept and making it unique. There is still one more move that investors should be keen to see the company make: hybrids.

Hybrids Are A Great Idea

Similar to the Steve Jobs 7-inch tablet quote, I now cite the following quote from Tim Cook:

You can converge a toaster and a refrigerator, but you know those things are not going to be probably pleasing to the user.

I'm sorry, but does anybody honestly believe that this is the best analogy that truly describes the scenario? I much prefer SA Editor Samir Patel's analogy:

A laptop/tablet hybrid (aka, the Ultrabook) is more along the lines of converging a refrigerator and a freezer - which I'd say has worked out pretty well for consumers.

Now, does that mean that all flavors of hybrid are destined to sell well? No way! But the fundamental notion that users want to get more functionality for their dollar (and maybe even better in many respects) is sound reasoning. Adding a touch screen to the MacBook Air lines would be the first step, so that higher end users don't feel that they're missing anything by going with a MacBook Air over an iPad.

In particular, I am quite partial to the Lenovo Yoga. It's a very well built machine with a beautiful touch screen (most PC manufacturers still think they can get away with crappy screens), a very fast Intel (NASDAQ:INTC) "Core" processor (so it's not slow like the low powered ARM (NASDAQ:ARMH) and Intel "Atom" chips). It's also selling extremely well -- does this story sound similar to anybody else?

For the first time, Ultrabooks are not simply bad MacBook Air clones (yes, the first generation of Ultrabooks stunk -- high price, no tangible advantage over the regular, more powerful, and cheaper laptops), but instead a very compelling evolution of the traditional notebook in its own right. They're not perfect today; Intel still needs to get to "Haswell" before the battery life, connected standby, and graphics performance are really there to make the platform much more broadly compelling. But the addition of touch (thank you for Windows 8, Microsoft (NASDAQ:MSFT)!) and a real focus on form factor are going to make the Ultrabook very cool by the end of 2013.

So where does this leave Apple? Right now, in the MacBook Pro, it has a clear lead over anybody else in the notebook space with its super high resolution screen. But what about the Macbook Air? It's going to start looking mighty boring if it doesn't have a touch screen. Sure, the argument is, "go buy an iPad," but an iPad can't do the productivity work or anything really performance sensitive like the MacBook Air, powered by a fast processor, lots of memory, and a more sophisticated OS, can.

If Apple wants its MacBook Air to stay relevant, then it's going to need to be a "great artist" once again and turn the Air into some kind of...well, an Ultrabook. Or maybe offer a convertible "iPad Pro." The point is, Apple did a great job of recognizing that people want touch screens, but its competition realized that people wanted touch screens on more than just their phones and specialized tablets.

And that's my bold prediction for 2013. The 10" tablet in its purest form will become non-viable. People will see just how useful having a touch screen/tablet built into the laptop they already bought and start choosing Windows 8 Ultrabooks over the current MacBook Airs. Heck, they may eventually choose these devices over the iPad (although I really think this won't really manifest itself until Intel's "Haswell" which will enable thinner and lighter form factors).

Apple, you're a great artist. The iPad Mini was a stroke of brilliance, and investors should keenly await Apple's "theft" of the "Ultrabook with touch" concept. Otherwise, Apple's Mac and iPad lines may very well see a market share loss to touch-enabled Ultrabook PCs and convertible Ultrabook designs, respectively. And while the main profit drivers at Apple aren't the PCs, it would be an indication of stagnation that even the mighty Apple could stand to lose the "innovation" race in phones next.

Source: Apple: Great Artists Steal

Additional disclosure: I am short ARMH.