Can the Apple Touch Sell the Tablet?

The Mac and iPhone maker may join a host of tech players hoping to win big in tablet PCs, an area where some of the industry's biggest names have failed

Apple may be at the forefront of a renewed effort to bring back the tablet. Electronics manufacturers across the tech landscape are hard at work on their own versions of these flat-screen computers that let users input information via touchscreen rather than keyboard.

"There's no hotter topic [than tablets] in Asia right now," says Richard Doherty, a director at market researcher Envisioneering Group, who says Apple has developed prototypes of two different tablet machines—one that resembles a large-sized iPod, and another that features a larger display. Apple may launch one or both devices as early as September, Doherty says. A decision on whether and when Apple takes the tablet plunge lies with Apple CEO Steve Jobs, Doherty says.

Regardless of what Jobs decides, tablets are in the works elsewhere, including at Nokia (NOK), the world's largest maker of cell phones, and TechCrunch, a popular tech blog and information provider. Electronics makers Archos and Asus began selling new tablets earlier this year. And industry analysts say other makers of PCs, cell phones, and consumer electronics are quietly designing tablets aimed at mainstream consumers.

All these tablet hopefuls hope to succeed in an area where many tech titans have stumbled. Tablets have taken off in narrow niches, such as construction and nursing. Motion Computing makes a rugged touchscreen device that can be dropped and sanitized; it goes for more than $2,000 a pop.

But several other tech stalwarts, including Microsoft (MSFT), have failed to generate widespread enthusiasm for tablets. Sony (SNE) and Fujitsu (6702.T) released tablets in years past, only to phase them out later. In some cases, the devices were too expensive; in others they were awkward to handle. "Price was part of the story, and it wasn't quite so elegantly done," says Roger Kay, founder of consultant Endpoint Technologies Associates. Last year, U.S. tablet sales fell by 15% to 711,000 units amid the global recession, according to consultant IDC. They began to recover in the second quarter of 2009, thanks to an influx of federal stimulus money going into industries such as health care, where tablets are used.

An Apple Tablet for Less Than $700?
The addition of new players such as Apple, however, could help make these machines as popular as netbooks, the small and inexpensive laptop computers whose sales are expected to almost double this year, despite the recession.

So what's different this time around? Price, for starters. Apple's tablet may cost less than $700, analysts say. Then there's the Apple software mystique. "Apple has a real opportunity to take the magic of the iPhone interface and give that more real estate to do the tasks," Kay says. "It's an iPhone, but bigger. It's something that you know, but bigger." The device may be able to wirelessly access iTunes and Apple's App Store, which offers more than 65,000 apps such as games, e-books, and calendars. Apple declined to comment for this story.

With these Prototype Devices it is able to run all Mac applications, and allows for video and audio editing and graphic animation, Doherty says. Another, which looks like a larger iPod, lends itself to watching videos, playing games, and reading e-books.

Some manufacturers hope to put out tablets with access to app stores from Microsoft or Google (GOOG). Microsoft's upcoming Windows 7 software is expected to offer additional touch capabilities as well.

Nearly a dozen so-called kitchen tablets will be based on chips from Nvidia (NVDA), says Mike Rayfield, a general manager at the company. With touchscreens ranging from 7 to 13 inches, these devices can be posted in a room like the kitchen and let family members check recipes, wirelessly check the weather during breakfast, or send text messages that let teens know when dinner is ready. Costing less than $200, these devices may even come free with a service subscription from a wireless carrier. "There's a ramp-up of interest," Rayfield says. "Apple's had a lot of amazing successes [with devices like the iPhone], so now people say maybe this is the next place to go."

The Kindle Could Be Most Vulnerable
Chipmaker Qualcomm (QCOM), meanwhile, is helping several customers design tablets that let users read e-books, view high-definition movies, play 3D video games, and browse the Web, says Luis Pineda, a vice-president at the company. The new devices will feature 9- to 10-inch screens and be released as early as later this year, he says. "Going forward, we see the e-book [reader] expanding into a tablet-like device," Pineda says. A Qualcomm chip already enables wireless connectivity in Amazon's (AMZN) best-selling Kindle e-reader.

Fujitsu in April said its FLEPia, the world's first color e-reader, is available in Japan. Its 8-inch display can show up to 260,000 colors, and it allows for Web browsing and e-mail. The company hopes to sell 10,000 units this year and 40,000 in 2010 in Japan alone. "Global launch is definitely something we've been looking into, but the timing is yet to be decided," Fujitsu spokeswoman Nagisa Kuroda says in an e-mail.

If successful, the new tablets could steal some of the thunder now being kicked up by e-readers like the Kindle. "People will be making choices between this and the Kindle," says Rob Enderle, co-founder of consultancy Enderle Group. "It could take up to 60% of Kindle sales." Amazon spokeswoman Cinthia Portugal says, "We don't focus on other companies; we are focused on offering our customers the best possible reading experience."

If tablets take off, they could also erode sales of media players, smartphones, and netbooks. "They come in between smartphones and notebook computers, so they could cannibalize both," Enderle says. "But they are closer to smartphones, initially they are going to pull from the smartphone side." Perhaps for that reason, Nokia recently expanded its relationship with chipmaker Intel (INTC) to focus on development of software and devices that are a cross between a smartphone and a laptop. In August, Nokia received permission from the Federal Communications Commission to sell its newest tablet-like smartphone in the U.S.

Those are some big ifs, however. Even if Apple and other companies succeed in adding cool features at a lower price, they still face another hurdle: making it easy to input data without a traditional keyboard. Then there's the trick of generating wide appeal for a tablet—something no one in techdom has been able to master. "That's really the wild card," says Tom Mainelli, a senior research analyst at IDC.