A Chance To Admit Defeat Early In The Tablet PC War

Tens of thousands of new products are released at the annual Consumer Electronics Show held once a year in Las Vegas. Technology company executives party late into the night and rise early to manage their displays and explain to their counterparts from other firms why each and every product on the convention room floor will eventually dominate its market.

Almost none of the new electronics shown for the first time at CES will even make it into mass production. The markets are too crowded with devices that business and individuals can use to make their lives more efficient, more informed, or better entertained. That does not keep technology companies large and small from the gamble that it is their invention that will make billions of dollars and transform the future of their firm.

This year a number of large companies which includes Dell (NASDAQ: DELL), Samsung, and Research In Motion (NASDAQ: RIMM) will release table PCs. Some will run proprietary operating systems. Other will run on software built by Google (NASDAQ: GOOG) or Microsoft (NASDAQ: MSFT). Each of them will aim to gain market share from industry leader Apple (NASDAQ: AAPL) which has had spectacular success with its iPad.

“Clearly, the iPad was really the new Genesis for the tablet category, and I think what that product has shown is that it really resonates with consumers,” said Steve Koenig, director of industry analysis at the Consumer Electronics Association according to IDC News. Tens of billions of dollars in tablet PC sales are at stake, as is the ability for Apple to launch a product and take an insurmountable lead over its competition.

Recent forecasts put Apple iPad sales for 2011 as high as 61 million. Apple’s ability to reach that number seems impossible unless its success with the iPod and iPhone are taken into account. Industry research firm iSuppli says that the iPad will dominate table PC sales until at least 2012. Apple will have and should keep about 60% of the market after that, iSuppli says.

Companies like Samsung suppose that they may get 10% or maybe 20% of the market. That would almost certainly make their tablet PC business highly profitable. It would also mean that the Korean company would have to beat out a large number of competitors equally qualified to make machines with similar features and functions.

The tablet PC war is not likely to be won by any company other than Apple, at least for the next few years. A number of huge companies will spend billions of dollars to take the No.2 spot or perhaps No.3 spot in a part of the consumer electronics business that looks extremely promising. Those efforts will be so expensive that it may take years or even decades for these firms to make back their investments. The companies that do not get substantial market share will never make their investments back.

It seems that all of the companies that can make tablet PCs will do so. That will be too bad for most of them. It is just as easy to pass on the opportunity and save large sums of money.

Douglas A. McIntyre