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Apple’s iPad lead will face pressure from Google and Nokia

Honeymoon is over for Steve Jobs

Apple led the tablet market in Q3, but iPad’s honeymoon will be shorter than iPhone’s.

Apple's headstart in the tablets market is giving the vendor a blissful honeymoon period in this market, where it has accounted for 95 per cent of sales in the third quarter, according to reports.

Credible competitors will emerge for the holiday season, so its share will be squeezed in Q4 – but it will still gain two-thirds of sales, according to a forthcoming report from Rethink Technology Research. In 2011, though, it faces the prospect of a Google attack, similar to that in smartphones, but this time riding on two operating systems – Android and the "cloudbook" platform, Chrome OS.

First products running this new Google system are expected to debut before year end and will be closely followed by another OS optimised for tablets and the cloud (unlike iOS or Android) – the Nokia/Intel platform MeeGo, which has attracted the attention of influential carriers China Mobile and Telefonica.

Recent market studies reflect the huge success of Apple's iPad launch, which sent many firms scurrying back to their drawing boards, delaying their own device releases to adjust to the trendsetter, and giving the Apple product a longer period of virtual monopoly.

According to Strategy Analytics, tablet sales will reach 80 million in five years, from 4.2 million in the third quarter of 2010, when Apple took 95 per cent share. Meanwhile, Juniper Research forecasts that annual shipments of tablets will reach 81 million by 2015 – with Apple maintaining its lead for the medium term.

Apple will lose share quickly, says Rethink report

However this time of clear leadership will be far shorter for the iPad than the iPhone, which had competitors from day one, but none that really matched its appeal for a couple of years at least. Device makers have learned many lessons from the iPhone story, and will be quicker to catch up this time, or to offer a clearly different value proposition. Samsung is already doing this with the main early challenger, Galaxy Tab, which is not an iPad copycat but comes in a smaller, pocketable size and with a heavier focus on integrated content.

By the end of 2011, the number of vendors offering media tablets will rise from about 25 to about 200, although the end of the year will already see the start of some fall-out. Rethink's forecast shows the iPad keeping its lead but with significant erosion of its share in the face of rising competition.

There were already early signs of this in the third quarter of 2010, when iPad sales, though healthy at 4.19m units (up 28 per cent on the first quarter of availability), disappointed analysts. Apple cited component shortages but there was also the anticipation factor, as consumers waited to see what other brands had to offer.

Nook Color: expensive e-reader or cheap tablet?

Barnes & Noble's Nook is the biggest challenger to Amazon Kindle, but is overshadowed by the global reach of its virtual rival. However, B&N has leapfrogged Amazon with the new Nook, which sports a color screen. In fact, with an LCD display and larger size, it comes close to being a tablet rather than a dedicated e-reader – which could be its downfall, making it an uneasy com- promise between the optimized bookwork experience of Kindle and the full capabilities of iPad.

The e-reader has been expected to morph into a more multipurpose tablet ever since it emerged, and it has certainly been a useful test ground for some design ideas before they were unleashed on the more complex and mass market slates sector.

However, many users do want an e-reader not as a dress rehearsal for an iPad or Galaxy Tab, but because they love the e-ink and integrated bookstore of a one-trick device. And the price is difficult too – at $249 far more expensive than a Kindle, but perhaps a low-cost entry to tablets?

There is a rising category of cheap tablets, often with more limited functions than the iPad – HP's printer slate, for instance. But Nook Color may also have a specific appeal of its own – for readers of magazines and children's books, or any other formats that are heavy on pictures rather than words. Indeed, B&N announced a new store just for kids' books with its new reader (but perhaps $249 is rather steep if the main aim is to get it into the Christmas stockings of under-15s).

Like its mono cousin, the device does have a full operating system, Android, and a smaller second screen for navigation – equally loved and dismissed by e-reader reviewers. However, the main screen will divide fans: those who bought the last generation Nook only six months ago, and want color, may be very upset, while others think a backlit, shiny display takes the main selling point, long-battery e-ink, away from a reader.

The new gadget is the same size as the Galaxy Tab, at seven inches, and runs Android 2.1 with a 1m-color screen. Going beyond the bookstore, B&N has also announced a developer program specifically for the Nook Color, allowing programs and content to be created for a rudimentary app store. This will evolve into a full publishing platform like Kindle's.

Apple will remain the market leader throughout the period, because of its brand power, its control of its platform and its ability to innovate. However, its share will drop sharply once it has real competition in 2011, and it will end that year with less than 40 per cent of the total by units (its revenue share will be higher as it will maintain some price premium and also has strong economies of scale). By 2014 its share will have stabilised around 20 per cent, still well ahead of other players, none of which we expect to have more than 10 per cent share on a consistent basis.

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