Apple: Creating the Device the Netbook Wants to Be 13 comments
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Just as Apple (AAPL) was unable to keep a lid on the news of its iPhone before its official announcement, it hasn’t been able to completely quell the speculation surrounding its imminent media tablet. In its teleconference to discuss its most recent and very impressive quarterly results, Apple’s COO, Tim Cook, was derogatory about netbooks yet again. Apple is clearly positioning itself to produce “the device that the netbook wants to be, but clearly isn’t.”
I’ve just reviewed 10 Pointers To What Apple’s Netbook Will Be Like and right now I can’t disagree with anything suggested there. It seems pretty much on the mark. The new device will be a tablet, no keyboard laptop and the price point will fill the gap between the iPhone and the low end Apple laptop.
Will Apple cannibalize its laptop market?
This is a question that can’t be answered precisely without spending a fair amount of time using the still-a-matter-of-speculation device. The truth is that the netbook has cannibalized the laptop market in a big way. There are two kinds of buyers in the netbook market; the price sensitive buyer and the laptop buyer.
- The price sensitive buyer: The price sensitive buyer is buying a device that wasn’t previously available at such a price point. To some buyers, devices in the $300 price area are “throw away” purchases. So what if I have to throw it away? Some buyers are buying because the price point is now low enough for a device for the kids. In developing countries, these buyers are buying because the price is now low enough for them to own a computer. The point about these buyers is that they are all new buyers. They are not buying the netbook instead of some other device.
- The laptop buyer: There is one huge advantage that the netbook has over every other variety of laptop. It doesn’t weigh very much. Weight is a big buying criteria. Netbooks have already spread themselves out across a wide price range to reflect this fact. In general you use fewer applications on a laptop, so you need less computer power, unless the laptop is also used as a desktop. Synchronizing information between laptops and desktops in now a long-solved problem. When a laptop buyer buys a netbook, a laptop sale fails to happen.
That’s the problem that Apple faces. There is little doubt that it will do an excellent job with its media tablet. It will have very little difficulty positioning its device as “the device the netbook wants to be” and it will be instantly popular on the day that it’s released. But it will have some difficulty preventing the cannibalization of its own laptop market.
A Media Device is a Media Device
A partial solution to the cannibalization problem is to make the new media tablet more like the iPhone than the MacBook. Have all the applications fed to the new device from the Apple App Store and have the interface be very touch oriented. Apple will need the consumer to believe that: if I need a keyboard, I need a laptop; if I don’t, I need the tablet. That won’t prevent cannibalization, but it will keep it to a minimum.
The other part of the game will be to make this the media device to die for. The goal will be that it becomes the must have video device or games device for an airline journey. Again this is more like the iPhone than a laptop. And Apple will surely include the possibility of it being able to be a phone, complete with carrier contract.
Disclosure: No positions.
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This article has 13 comments:
Apple keeps it's product clean and simple.
With the new tablet, it has to fit in to its current line up of products without cannibalising existing sales.
ie, not to do a Dell and offer everything under the sun..
Let me use an example. For years, iPod sales have been projected to decline because they hold a heavy market share in developed countries, and because conventional wisdom would lead one to believe that a single buyer would have limited use for additional iPods. With each successive, and often cheaper, iPod model introduction, the entire line would appear to the casual observer to be imperiled by cannibalization by cheaper new models. What has actually happened is that core iPod users not only buy new models for themselves to fit certain lifestyle applications (ie shuffle for running, Touch for travel), they also tend to buy them in multiples, for gifts, and for their families. Hence, one decision maker - to whom Apple has marketed in an incredibly effective fashion - has done the work of 5-10 regular customers. Perhaps 10 million of these core customers, who in most cases are probably fanatical about Apple products in general, could account for at least 25% and as many as 40% of iPods sold in the past 3 years.
Anecdotally, I also see few customers making a decision between buying a MacBook (Pro) and this new tablet. Many who would buy this tablet probably already have a Mac notebook, and of those who do not, if you look over multi-year spans, they will probably end up with both. That's the hidden beauty of Apple's economic model of keeping prices high; they are self-selecting customers who are forced to make fewer hard 'either/or' decisions.
That's why the cannibalization theory, as it normally exists, applies very little to this product.
And let's do some simple math. Apple sells this product for $699. In the first year, they sell 5 million, which I believe is a conservative number for a machine running a decent version of Snow Leopard and some some (possibly even full scale) productivity applications. That's $3.5 billion in revenue (at full retail ASP).
Boom, Apple just grew its annual revenues by 10% with one new product.
i stopped buying desktops a long time ago because they were too heavy for me to haul to the Apple store for upgrades, but with the mini, that's no longer a problem with those and you can have an enormous display for movie viewing.
it just seems logical that we'd all have something portable that did most things, but then at home have larger screened computers.
whatever Apple does, it'll be elegant and innovative and I'm looking forward to it.
I already have 20 Macs.
The easiest way it won't cannibalize Laptop sales is to be an accessory to the digital hub just like the iPod is. The hub is the Laptop. As such, an iPod Tablet / iPhone Tablet running the touchscreen OS X would hardly cannibalize the Laptop market. Rather it would create its own market and bring additional revenue to Apple.
Obviously, if it acts like an iPhone and can be sold unlocked so that one can slip in one's own iPhone SIM and use it to browse and use the internet wirelessly, then it would be totally unlike the MacBooks.
It can be positioned as the ultimate handheld games machine, ultimate handheld movie device.
Imagine one installed in place of the car radio on your BMW!!!! It can be sold in millions of cars each year.
You can load books into it. It would kill Kindle as a hardware device.
It would open up new markets and niches and profits for Apple.
And it would be cheap to build, unlike a Laptop. Thus profit margins are much higher - an Apple tradition.
Hence it would cannibalize but also expand the market for those devices, while providing even higher profits.
I will trade my gen one iPhone immediately for this.
No law restricts great to Apple. Apple's job is to find a way to maintain acceptable margins and sell a ton of the tablet. And, looking at iPod and iPhone sales, Apple knows how.
So, what are the deficiencies which Apple remarked upon? Tim Cook complained of cheap prices which lead to poor quality and poor performance. I also suspect that the Netbook designers can be faulted on what they gave their highest priorities. The current Netbooks are nothing that Apple would be proud of delivering to its customers. Therefore, Apple is unlikely to provide an equivalent to the Netbook in today's form factor.
So, what might Apple think is a poor design priority in current Netbooks?
Weight -- too heavy
Physical size -- too large
Screen size -- too large, but still has poor movie viewing
Keyboard -- unnecessary
Mobil Phone connection -- expensive
All of the above add to the expense and weight of the Netbook without giving the customer what they want. A ten inch screen forces an unwieldy package. The Keyboard is hardly necessary for a devise which mainly used on the web. A Mobile Phone connection adds about $1000 a year.
If Apple intends to carve out its own niche, rather can slavishly copy what its competitors do, then it needs a new form factor. But, the form factor needs to be time tested, so that it feels customary even in a new product.
That is why I suspect a larger iTouch in Paperback book format of smaller than 6.75" by 4.25." A 6.6" screen with 240 dots per inch resolution would give 1344 by 840 pixels in 16/10 format. The screen itself would be 5.6" by 3.5" so a finished product would be the same size as the US dollar bill, but an inch wider. Many a wallet is in that size, so it would fit into a back pocket or purse if it were slim enough.
The main advantage is that it would not compete with Apple's laptops even if the Apple Netbook would cost about $400 to $500 because of the bigger screen with a high resolution. Apple hasn't minded competing with itself in the iPod market.
Anyone who seriously needs a keyboard would be willing to pay $500--$600 more for a MacBook which has a good keyboard and a bigger screen.
Best of all, a bigger iTouch would fit right in to Apple's current line up. It would leverage on Apple's previous successes.
"I have a question about the possibility of an Apple net book. Since net books are admittedly purchased to provide a "cheap" internet access and some basic computer capacity."
Apparently your reading comprehension skills need upgrading.
The point made repeatedly by many posters is that AAPL WON'T make a CHEAP, CRAPPY, UNDER-POWERED Netbook, but will make a revolutionary devise with the hallmarks of AAPL--quality, versatility, & ease-of-use.
"How would Apple compete, their products are much higher than their competition?"
Besides the stupidity of this specious argument, it is pretty obvious that people that have the sense they were born with recognize that AAPL are WORTH their price. Even Evil Empire morons are starting to wake up to this revelation.
Ayuh
Flat pad. Local network. Realtime Two-way Video.
About the size of a kindle without the crappy keyboard.
Really - people are paying $359 for that?
Watch a movie or tv show without the bulk of a macbook.
Data surfer. Book reader. User annotation.
Perfect.
Wifi and bluetooth only.
Tether it to an iphone wifi network for on the go cellular access.
I'll take two.
I don't care what it does.
It has an apple on it with a bite out of it.
I want several.
If this is true, it does not eat into laptop sale (because most people cannot do a lot of typing on the touch keyboard without dying of frustration --- unless a third party comes out with a keyboard-stand combo). Still as others have said, this device would appeal to the installed base who may want to have this and a laptop. I am one of those. I like the Kindle form factor a lot, but I am holding out for a color display to browse the web and watch video also.