By Benjamin Pimentel
The tablet war is pushing personal-computer makers to focus more
on research and development and Web-based ecosystems to enable
their products to stand out in an increasingly crowded market.
It's a marked shift for companies that have long relied on
Microsoft Corp.'s (MSFT) Windows operating system and Intel Corp.'s
(INTC) chips--a partnership referred to as Wintel--in leading the
way in the PC industry's core innovation.
"The situation is changing," said Acer Inc. (ACEIY, 2353.TW)
President Jim Wong in an interview during the recently concluded
Computex exhibition. "It's more open ... No more Wintel ... The
industry is evolving."
The evolution was highlighted by IDC data released this week
showing the PC market slowing down even at a faster rate than first
expected. IDC cut its forecast for PC shipments growth for this
year to 4.2% from 7.1%.
The decline has in part been blamed on the growing popularity of
tablets, led by Apple Inc.'s (AAPL) iPad. This has prompted PC
makers to roll out their versions of the device.
Wong compared the rise of tablets with the early years of the PC
which were marked by "many years of a lot of innovation" before it
led to "a very common design."
Wong said he sees innovation ramping up in the tablet and
overall mobile space before the push to differentiate weakens as
the market matures.
"It's just a cycle," he said. "So the industry just keeps going
up and down. And that is the reason why our R&D is going to
grow."
Analyst Shaw Wu of Sterne Agee said he sees a similar pattern of
commoditization when it comes to tablets.
"We believe tablets are going to be a redux of PCs," he said.
"Near-term spending is likely to go up as tablets are still a
relatively new space ... Google Android is the new Microsoft
Windows, meaning there is still plenty of room for innovation for
players like Apple who choose to play in the space their own
way."
In fact, PC makers are emulating Apple's way, particularly the
Cupertino, Calif.-based company's ecosystem, highlighted by the
iTunes which the company this week said it was expanding into what
it calls an iCloud of services for its devices.
At Computex, Wong of Acer talked about a "personal cloud" that
would enable users to connect their devices through the Web.
Analyst Tim Bajarin of Creative Strategies Inc. said that
hardware innovation is "only one-third of the equation when it
comes to a successful tablet program."
"It needs content and a lot of customized services to become a
winner in a crowded market," he said. "And vendors using Android
must innovate in content and services and not rely strictly on a
generic Android ecosystem to deliver the products and services
customers will want in the future."
But a key problem for many manufacturers is that Apple has a
two-year lead, he said. "And they are not standing still," he
said.
And it will be a big shift for PC makers to make the investment
in the cutting edge innovation to catch up with Apple.
"It's not just one invention but a whole portfolio that is
needed to make a difference in this industry.," analyst Roger Kay
of Endpoint Technologies Associates said. "Apple spends a lot of
money on a few areas to keep its edge. Companies that are
innovating in the new 'high mobility' era include outfits like
Qualcomm (QCOM), which has as much cash as Intel, and HTC, which
bet early and heavily on high mobility."
Kay added, "I don't know what sort of R&D spend Wong is
talking about, but up through now, Acer has pretty much taken
off-the-shelf technology and integrated it. I'm not sure he can
make a fish fly."
Wu of Sterne Agee also noted that Acer entered the PC market
"after it was commoditized." In the 1970s and 1980s, when the PC
market featured such companies such as Apple, International
Business Machines Corp. (IBM), Dell Inc. (DELL), Compaq and Tandy,
the research investments were much higher "as it was a relatively
new space with more innovation."
"As Microsoft and Intel got more powerful into the '90s, the
space got more commoditized," he said. "Ironically, that's what
helped Acer become a big player in PCs."
Wong is optimistic about Acer's competitive position in tablets
and mobile in general. He also argued that "Android tablets
collectively" will eventually overtake Apple.
Some analysts are skeptical.
"I am not so sure that Android can eclipse Apple's position in
the next two years and even then, we believe Apple will have at
least 50% of the tablet market in 2014," Bajarin said.
Ticonderoga Securities analyst Brian White said in a note,
"Tablet mania continues, but the iPad reigns supreme."
Of the more than 30 companies that demonstrated their tablets at
Computex, he said, "We found nothing that is likely to be a
competitive threat to the iPad 2."
"Essentially, Apple enjoys a vertically integrated digital
ecosystem, economies of scale in purchasing power, unmatched
aesthetics and a powerful brand, combined with the ability to
control quality through the development of both the hardware and
software," White said.
Software, said IDC analyst Crawford Del Prete, is key in the
tablet war. This is also the reason why some device makers,
including PC maker Hewlett-Packard Co. (HPQ), are focusing on their
operating system.
H-P has said that it plans to use WebOS, the operating system it
inherited from its purchase of Palm Inc., to offer an integrated
platform for new devices, including tablets.
"There are just too many seemingly small but very important
usability features that must be addressed on new platforms in order
to make customers happy. This is at the core of Apple's success,
and why H-P and Research In Motion have invested so much in their
own OS's," he said.
This is where Android based systems have struggled, he
added.
In fact, Acer's experience with the Chromebook, the new laptops
based on Google Chrome operating system highlight both the
strengths and weaknesses of Google's cloud services.
Acer's Wong spoke about how, with the Google cloud services, the
Chromebook "will improve in performance constantly." But he also
said Google's cloud services "is not pervasive anywhere you
go."
That's why software integration is such a critical component,
Del Prete said.
"For Android, this is a big reason why these devices are not
selling--integration with other platforms," he added. "I argue that
the biggest reason that the iPad has been a runaway hit is not only
all of those apps, which were not native 12 months ago, but iTunes
integration. The fact that Apple customers could quickly and easily
buy movies/shows and music off of iTunes created compelling value
from day 1. This comes from software development expense."
-By Benjamin Pimentel, 415-439-6400;
AskNewswires@dowjones.com