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.)
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 Amazon.com 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.