Mobile Computing Wave Part 2: Why the Future Belongs to Apple’s iPad

14 | By Michael A. Robinson

The Apple iPad is more than just a great tablet; it’s the single most important computing device released in more than 25 years.

In fact, you’d have to go back to the introduction in 1984 of the Macintosh personal computer to find a machine as game-changing as this one.

Of course, back then, the Mac grabbed only a small share of the huge PC market. But what it did do was establish Apple Inc. (NASDAQ:AAPL) as the sector’s clear technical leader. It also gave birth to desktop publishing.

This time around, however, Apple has turned the tables on its rivals in two ways…

  • First, it came up with a breakthrough approach and the ideal screen size. At nearly 10 inches diagonal – very close to the size of a piece of paper – this format feels natural to most users.
  • Second, it’s a runaway success, boasting 70% of the market share.

That leaves tech investors like us with two choices: Learn what this all means, or get left in the dust.

You see, the PC industry is going into a long decline. It’s already started. Ditto for newspapers, magazines, music distribution, and lots of other physical products that will get transformed into software.

So says Michael Saylor, author of the hot new book “The Mobile Wave: How Mobile Intelligence Will Change Everything.” As I told you last week, I tracked Saylor down to talk about how mobile computing fit into the Era of Radical Change. (You can read the first of my three-part series here.)

His is hardly an academic view. See, Saylor also serves as the CEO of MicroStrategy Inc. (NASDAQ:MSTR), a leader in business intelligence.

He believes five billion people will use iPads or a comparable device within a decade. That’s roughly 75% of the population of Earth. No doubt, he admitted to me, that’s a bold prediction. He added this:

“It’s a prediction upon which you can make a lot of money if you’re an investor. Because if I’m right, then you will have beaten the crowds to that conclusion. And the reason I believe that is – we’ve reached an inflection point, where it’s now cheaper to learn to read on a tablet than it is to learn to read on paper. And I think that’s a very, very meaningful thing.”

Naturally, I wanted to know just what investors need to do to make money off this trend, so I could share the information with you.

Saylor answered by sharing four key facts every investor needs to know about this market-dominating device.

Here they are…

Key iPad Fact No. 1: Apple Has “Won” the Market

The company can barely keep up with demand for its iPads. It has what amounts to a one-hour inventory. That is flat-out incredible.

Here’s Saylor’s take on it:

“Every iPad they can manufacture, they’re selling. They’re capacity bound. They manufactured 17 million in the past 12 weeks when they reported (earnings). That’s gone from nothing to call it a 70-million-unit-a-year business. And they’re selling these things at $700 each. So it went from zero to $50 billion a year in revenue with a 40% gross margin in (about) 24 months.

“No stock is without risk, but I believe the risk in Apple stock has moved to [only] political intervention. I don’t think there’s really any execution or competitive risk anymore. I think they’ve won the market. I think at this point, you need an enemy – the power of the Chinese government or the EU or the United States of America to put a dent in that steamroller.”

Key iPad Fact No. 2: For Amazon, Size Matters

Saylor considers the iPad an “enterprise” class tablet, because it has a 10-inch screen. At that size it works great as a media-rich mobile sales brochure people can use when meeting with clients. In fact, he and other CEOs have begun equipping their entire staffs with iPads.

Jeff Bezos should be so lucky…

The billionaire founder of Inc. (NASDAQgs:AMZN) introduced the Kindle e-reader and the new Fire version – which competes with the iPad – with just seven-inch screens. That size just won’t work for business users; it’s too small. Says Saylor:

“Now ask yourself this question: Why seven inches, when he automatically seeds 90% of the market to Apple? Why would you do that? Well, I think there is an answer. He’s either stupid, right? Or, he is unable to bring a 10-inch device to the market, right? Those are the only two answers. You fill in the blanks. Do you think he’s stupid?”

Key iPad Fact No. 3: Google Can’t Catch Up

No doubt, Google Inc. (NASAQgs:GOOG) dominates the search-engine sector. No one else comes close. This cash-rich firm invests heavily in other forms of cutting-edge high tech, like robot-driven cars, too.

But in the tablet market, Saylor explained, Google will never become more than an also-ran against Apple. He has great respect for Google co-founder Larry Page, but not even Page can compete with the iPad, and again, it has everything to do with the size of the screen.

“Larry Page is equally rich as Jeff Bezos and equally smart and equally aggressive. He’s engaged in asteroid mining. These guys are not afraid of anything. And so Google also comes to the same conclusion that Amazon comes to, which is, they need to be in the tablet business.

“Do you think they believe in the future of e-Books? Of course they do. Have you ever used Google Maps on an iPad with a 10-inch screen versus a seven-inch screen? Which do you think is better? A book is better, the map is better. Google is in books and maps.

“Larry Page has infinite money. He’s infinitely aggressive. He’s very smart. How come you release the seven-inch tablet? Same issue, right?”

Key iPad Fact No. 4: Microsoft Has Confused the Market

No doubt, Microsoft Corp. (NASDAQ:MSFT) remains the clear leader in the global PC software market. But as Saylor sees it, over the long haul, that is low-growth business – at best. Here’s how he views Microsoft’s tablet play.

“So they announce “The Surface.’ Well, the Surface is a 10-inch tablet. Okay, they got that right. It’s got a keyboard. That’s a liability and an asset. It might be good, but all it tells me is that they’re not going to rebuild all their apps to run without a keyboard. It’s going to be really hard (to use), and you’re going to end up with 47 tool-chip bars and 5,700 keyboard commands, and you’ll want to kill yourself.

“Then they announce they don’t know what chips it will run. They don’t know what operating system it will run, and they’re not sure whether or not it will be on a phone. And they don’t know what it will cost. And they don’t know when it will ship.”

Thus, Saylor believes Apple has already won the tablet wars. He advises investors to keep an eye not just on Apple but on all the firms in Apple’s “ecosystem” – from wireless carriers to chip makers.

At the very least, use caution when going long on any companies that make PCs.

Because make no mistake…

The future belongs to the iPad.

14 Responses to Mobile Computing Wave Part 2: Why the Future Belongs to Apple’s iPad

  1. Dad says:

    While I believe tablets are gradually becoming viable business tools, I am not sure Apple is the guaranteed (long run) winner. Your commentary assumes the competitors will stand pat until Apple evolves both scope and technology of this tool. At my house we have both the Apple and the Sony tablet S – and the Sony is by far the more popular choice. It is not that Apple is inferior, it is that Sony bundled a lot of great things that really work in for free, it is a cheaper unit and it is super reliable. The only shortcoming is lack of a hdmi output. I think Apple competitors will move along utilizing compatible technologies operating across a variety of manufacturers making new tablets a VHS standard, while Apple the premium BETA standard.

  2. vin says:

    to be honest with you. ipad is just another 10inch and nothing special.

    google has has it covered and the users to be more successful than apple.

  3. paul sykes says:

    Today’s technology is sometimes just a good guess..when things could suddenly turn on a dime
    almost in front of one’s eyes..It is a very difficult task to really understand the forward movement
    of technology without living back in the history of the very invention of the powerful leverage of a little transistor that made this age explode with unlimited possibilities.
    They are many great things in technology that we are now on the very threshold of experiencing..
    with only few of a very rare breed left, that is very clear on what is to come in this very near future and have found these fine needles in the haystack…paul m sykes

  4. Pierre says:

    I PAD is currently nothing but a large intelligent phone. A big toy to browse the internet, send and receive emails and maybe play a few games (for those that are into that sort of thing). I will not consider buying an I pad or other tablet until they can do what my PC or my MAC do for me in matters of word processing, spreadsheet and other really productive work. I hope that Microsoft do it right with their Surface tablet, but I am not holding my breath.

    • Dave says:

      Spot on, the IPAD is a large phone. I reached the same conclusion about my Kindle Fire, it is a large Android phone (that doesn’t make phone calls). Everything other than talk I want to do with my phone is more practical with a tablet.
      The tablet, by design, is a touch screen Netbook, without the convenience of a keyboard. Less useful than a laptop, which is a compromised PC. Each a little less productive than the machine it attempts to supplant.
      So, obviously, I don’t think the PC is going away soon. Sure, sales decline, that means most folks already have one.

  5. Mario Pedini says:

    Be ready for a continuous war on patents on design and technology. Lawyers are going to be drooling……..
    The advantage of Apple at this stage is not only this machine, which is admittedly great, although expensive, but the ecosystem approach, connectivity with their computers, smartphones, the cloud and God knows what will they prepare in the future

  6. nove says:

    the size of the screen is an issue. i find the 10″ ipad too large to carry around without a backpack. i consider the 5″ samsung galaxy note and the 7″ samsung tablet way more practical as they can both fit in some of my pockets. the tablet should be your computer on the go so the manufacturers should find the balance between practicality and screen size. in five to seven years time i think that google will have the dominant market share in tablets.

  7. William says:

    I have tried to migrate to Apple but my business apps won’t run on apple without the use of product like Fusion or Parallels. Even with these tools I can’t run a label printer, that is critical to my business. In fact I find that the majority of my time is spent in Windows.

    One can’t dispute Apple’s superiority in graphics and social media. The tablet is marvelous tool but isn’t a substitute substitute for a business laptop. Possibly when Cloud Computing matures it will have a limited roll as a interface terminal. Until then I am forced to maintain my PC.

    • Crispina says:

      For after sales support, I agree. Apple is tops and this I know from exenriepce. But for hardware that’s tough. The iPhone 4 is a magnificent piece of kit (as I believe you Brits say) and elegant all around, problems notwithstanding. But I’ve always been impressed with the quality of Nokia phones, even though I can’t stand the Symbian software. HTC seems to run the gamut from Mercedes to Yugo, but their Mercedes class stuff is 1st rate. The only Samsung phone I ever owned was the Focus I owned briefly, but other than the gorgeous screen, I wasn’t much impressed by its build quality. Sony also tends to make some stunning hardware look at how impressed you are with the from of the Arc and I find my Xperia X10 to be a quality piece of work. Actually, I am thinking that building quality hardware is relatively easy if a company wants to put the effort into it. But after-sales support is where most companies fall on their faces and I truly don’t recall having having seen any company get that as right as Apple does. Not that they don’t have their fails they sure do as any company that large will. But walk into an Apple store and go to the Genius Bar and there’s a far better chance you’ll walk away impressed than not. (I can’t speak to phone support as I’ve never used it).

  8. suzanne s. says:

    1984, If we had invested in Macintosh stock verse’s the same amount of $ into buying the personal Mac computer we would be more fiancially wealthly, however less rich,we are more rich in all the gains acheived. The range of information, universal approach, connectivity and dedication to progress is what this company excells at. How could one not recognize that they are the Babe Ruth of every play & the best at the game?

  9. Nick Eusepi says:

    Jobs had ‘visions’ on the market potentials and legittimate technological fronteers, and the rest of the PC story is just copying Steve, including Bill, as you know. Now Steve is dead, Mac will drive a little bit more with his original push, the business is all in the immage that permits over-selling the product in combination with telecom carriers interests which prices artificially high. It works. But this leverage needs lawsuit against ‘copiers’ such as Samsung, to defend the immage, but this heavily allienates consumer sympathy (Samsung is a very good product and Apple cannot pretend to be a monopoly, it just wont work). This is all there is to it, waiting for another genius.

  10. Dave says:

    Saylor is speaking beyond his narrow expertise. Bezos conceived a color e-reader to augment the black & white line. Realizing as any good merchant does, that his inventory excludes much more than books, he added the Fire. Color is the appropriate choice for the other types of media Amazon sells. As for the screen size, that is a logical choice for a book seller. If Saylor understood book readers (the people, not the machines), he would recognize the Kindle as approximately the printed Octavo book size. Octavo is the most common hardback/softcover book size. Thus, the e-reader feels normal. The Fire was not designed to compete with the IPAD, merely as a logical iteration of the Kindle line.

  11. Matthew Gudenius says:

    I would (and do) say the EXACT OPPOSITE. I have been working with and programming computers for over 25 years (yes, I started in MS Basic on DOS when I was 8 years old), and in those 25 years, I have possibly not seen a more USELESS device than the iPad emerge.

    It does not provide any benefits over the technology that was already out there:

    1) It’s as limited as a smartphone, but not as portable… you can’t stick it in your pocket. So in that case, why not just use a laptop? What productivity benefit does having a touch screen give you? In many cases, none. But the lack of the keyboard presents a real PROBLEM and REDUCES productivity.

    2) It can’t run Flash, which means you can’t get the full functionality of 25-33% of websites out there. Since when is it okay to release a device that is not backward compatible?

    3) You need a computer just to get it to run.

    4) Lack of USB means lack of access to many peripherals, and lack of storage card slot = no expandability, forcing you to use cloud storage. Not always a good solution… like if you are at a school or business sharing an ISP connection with hundreds of other people.

    5) The people making the apps for it are doing so on ACTUAL COMPUTERS. Without computers (and people who know how to use them), you would not be able to do anything on your iPad… thus iPads CANNOT be a replacement for the computer.

    Anybody who wants to see more can check out my videos on YouTube such as “Just Say NO to iPads for Education” and “Cloud Computing is a Dirty Word!”

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