Ever since we predicted that tablets would pose a serious threat to PC's in general and the Wintel duopoly in particular, things have moved forward more or less as we predicted. PC sales are down, tablets are overtaking them and both Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) are, each in their own way, struggling to cope.
Intel is relying on its process advantage to muscle into the tablet market, and only lately does it seem to get some traction thanks to their latest Bay Trail processors (in the Atom line). Their mainstream iCore processors for PC's are still struggling in tablets due to their energy and cooling demands. Intel still has almost no traction in smartphone category.
Microsoft morphed into an OEM producing two hybrids (tablets with detachable keyboards) that have won some plaudits. But the trade-offs it had to make are for everybody to see. Because of the demands of fully fledged Windows, which can only run smoothly with a serious processor, in order to avoid producing an unseemly thick tablet with relatively short battery life, it had to create a new operating system, Windows RT.
But that basically conned people into thinking it could run all legacy Windows programs (it does run a version of Office, but that's about it). We're really not sure where Windows RT is heading, especially as the progress in processors will produce an outcome in which a fully fledged Windows tablet/hybrid can run on a relatively underpowered processor (like Intel's Bay Trail processor).
So the latter seems to put the Wintel duopoly back on track, at least in the hybrid/tablet market. If a Wintel tablet can run Windows smoothly, on a small processor without needing a fan and producing all day battery life, then Wintel would have closed the hybrid/tablet performance gap with respect to Apple and Android.
While performance (which determines much of the experience, the dimensions of the tablets, and battery life) is one thing, there is a good deal of inertia and network effects at work to keep Wintel from taking the tablet/hybrid market by storm. Yes, the advantage is that legacy Windows software runs, but no, that advantage doesn't matter to everybody (we believe it's more important in the corporate sector), especially as good alternatives often exist.
What's more, Android and iOS are essentially a duopoly, they have captured most of the market. There are some mild network effects that makes them difficult to unseat:
- Virtuous cycle: having a bigger user base attracts application developers, which reinforce the attractiveness of the platform
- People getting used to a platform, and they will experience some switching cost moving to another one (data, application compatibility, learning new tricks, etc.)
So even the mighty Wintel duopoly will have a hard time making serious inroads in what are already relatively established positions. The funny thing is, there is no shortage of other wannabe platforms:
- The mighty Samsung (OTC:SSNLF) has announced it's developing its own platform called Tizen
- The makers of Mozilla Firefox are producing one
- Linux is also creating a tablet operating system
Here is SA contributor Alex Cho on Samsung, which is based (like Android and Firefox) on the open source platform Linux
Samsung is planning on releasing its own mobile operating system, and it is called Tizen. In the past, the company's internally created operating system, Bada, was partly what led to Samsung's own downfall.
Why would they be successful this time around? Indeed, Cho argues it could be a disaster for Samsung. It does have some tricks up its sleeve though:
The operating system is open-source, and runs on PCs, tablets, smartphones, and even televisions.
Unification of operating systems would be a significant selling point, moving seamlessly from mobile, to tablet, to PC (we're not sure the TV would add much to this), but cloud computing and interchangeability of data sort of recreates that experience, although in an imperfect way.
The latter could change with the Glassware technology from Canadian company Sphere 3D (SPIHF), which enables any platform to run any application by virtue of cloud virtualization, creating a private cloud. But we digress. For now, such seamless computing has to come from a unified operating system.
We seriously doubt whether Samsung has the heft to make this more than a niche product without cannibalizing its own smartphone and tablet sales, or whether the seamless computing provides enough advantage to enable Samsung to capture a significant market share with Tizen.
The third operating system proposing a tablet platform is the one on which most others are build, Linux. One might wonder why an operating system that only has been able to achieve a small market share in PC's would fare any better in tablets. There doesn't seem to be much hope:
Canonical with their Ubuntu Touch initiative isn't the only project that's failed to deliver as of yet with a successful non-Android Linux tablet. While there's arguably still hope left for Ubuntu Touch to become a commercial success, there's been more Linux tablet projects that have faded away. [Phoronics]
Look for instance at the various incarnations of the Indiegogo, a crowdfunded project that first produced a dual-boot tablet (the first booted from an SD card):
Overall, the PengPod 1040 feels a little bit to me like a sports team in preseason -- all the key components are there, but they aren't quite working together perfectly just yet. I had trouble doing much of anything in Linaro (the ARM-compatible version of Linux that the PengPod comes loaded with) due to some apparent redraw problems and the aforementioned connectivity complications. Android worked pretty well after the partition size was adjusted, but was generally just a smidge more sluggish than your average consumer tablet. [CNET]
However, the CNET author goes on to note something important:
Among the PengPod's better qualities is its vivid 2,048x1,536 display (equal to a Retina DisplayiPad) and solid build. Despite the bugs, the Linaro Linux desktop has been adapted for touch just about as well as can be expected, and the tablet can also run the fledgling Ubuntu Touch, Fedora, ArchLinux, and OpenSUSE.
Ubuntu Touch. According to Jack Wallen, that holds much promise, because:
1. It will actually happen
2. An Ubuntu tablet will be user-friendlier than the competition
3. An Ubuntu tablet will out-flex Android
4. An Ubuntu tablet will run Android apps
5. The Ubuntu tablet will be a near-desktop OS
Of course, this is just the opinion of one guy, but what if he's right. The first two points seem uncontroversial. A trial version already exists and it's one on which Wallen bases his claims:
I've used the Touch interface. Although it's still a bit rough around the edges, it was amazingly user-friendly-- more so than the Android tablet or the iOS interfaces. I know this sounds like fan-boy speak, but the developers have done an great job of creating a highly intuitive interface that will have users saying, "That's what a tablet interface should be like!"
If a pre-release version already manages to wow a few people, we should at least wait for the polished version to come out and see for ourselves. In our view, the absolutely crucial point deciding whether it will be a niche product or whether it will have a shot at taking serious market share will be whether the Touch will be able to run Android applications:
At one point, Shuttleworth claimed that the Ubuntu tablet would not run Android applications. He has since recanted that stance, and it looks like Ubuntu tablet users will be able to have the best of both worlds. It's not clear if this will be made possible with the help of Windroid or if another layer will be created to facilitate the running of Android apps. Either way, this will be a serious feather in the cap for the Ubuntu tablet.
It seems likely that the Ubuntu Touch will be able to run the same programs and applications as a desktop version. Because of the low penetration in the PC world (despite Google running Linux in their office and servers, for instance), this isn't such a big deal compared to Windows. However, if Ubuntu Touch takes off, this could very well function as leverage in expanding the PC market share of Ubuntu, creating further problems for Microsoft.
We assume this strategy was too complex to pursue for Apple (NASDAQ:AAPL), otherwise they could have leveraged their success in the tablet space, taking more market share than they have done on the basis of a (well deserved) halo effect. But we digress again, there is something else to note this month:
Canonical has just signed its first deal to supply a smartphone with its mobile operating system, Canonical founder and product strategy leader Mark Shuttleworth revealed in an interview here at the LeWeb conference. He wouldn't say which company has agreed to use the Linux-based OS, but said it will be offered on high-end phones in 2014. [Steven Shankland]
And, according to Canonical (and Ubuntu) founder Mike Shuttleworth they are in talks with another four big OEM's. Here is how they're trying to establish a beachhead in this market:
Partnerships with those who offer services -- partnerships with companies like LinkedIn, Baidu, Facebook, Evernote, and Pinterest is one way. Those with online services see Android as a vehicle to drive people to Google (NASDAQ:GOOG) services, and they're looking to back an alternative that will give them top billing, Shuttleworth said. Ubuntu Touch puts those services front and center in a rich way that elevates them beyond mere app icons.
The article also provides some more clarity on what kind of apps will be able to run on Ubuntu Touch:
it can run apps written for that Linux kernel, for a Java layer on top that's not far removed from Android's app underpinnings, or Web apps that are the lifeblood for Firefox OS. It's hard to imagine that Android developers will eagerly to produce a sister version of their apps, no matter how easy the developer tools make it, unless Ubuntu Touch spreads widely. Shuttleworth believes they will, though, since they already have to reckon with a fragmented Android device market and Ubuntu Touch isn't far removed. "We make no claims for Android compatibility, but we make it super easy for you to target both at the same time and super cool for you to do so," Shuttleworth said.
So it will run some Android apps, Firefox apps, and in any case, it will be very easy for developers to re-write their Android apps for Ubuntu Touch.
We would still prefer outright compatibility though, and perhaps that could be achieved as it looks like this issue isn't settled yet. If they achieve that, then the elements seem to be in place for a considerable market push. There is no guarantee, their marketing budget is small and they're up against big established players dominating the market.
Any new operating system trying to establish a position in the hybrid/tablet (and mobile) space is encountering multiple obstacles, especially in terms of installed base and availability of applications. Provided Linux Touch is as smooth and flexible as a test version suggested, and (crucially) provided it enables to run a vast number of Android apps, we see this as the only likely candidate.
If Linux Touch can deliver on these promises, it could really upset the competitive landscape in the hybrid/tablet (and even mobile) space. The main victim is likely to be Android. But we have to wait and see, and the other operating platforms are not sitting still.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.