The Apple's Tablet PC

The Apple's Tablet PC

By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) --Figuring out what Apple Inc. has in store for its next big productlaunch has become as popular a game as gathering to pick fantasyfootball drafts every fall.

And with holiday shopping season approaching, speculation isgrowing about what will be the next must-have device that Applehopes will wow consumers and lead to a boom in sales.

Since the company only recently hasupgraded the iPhone, and revamps its Mac PC models throughout theyear, it follows that something involving the iPod could be next.And Apple /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL166.52, -0.26, -0.16%) historically holds an event in September or October to show off the newest iPod model.

While iPod sales have remained solid, there is a belief that thegrowth rates for the digital media players could be slowing,leading to the thought that Apple could be about to enter themarket with a new tablet, or mini-PC, that falls somewhere in sizeand scale between the iPod touch and the MacBook laptop PC.

Of course, Apple is saying nothing. However, industry analystswho follow Apple say it's all but certain a tablet version of theMac will be on the market by early 2010, if not sooner. Thepotential benefit to Apple could end up being billions of dollarsof new sales.

Piper Jaffray analyst Gene Munster said recently that he haddiscussions with an Asian component supplier which said it hadreceived orders for a touch screen device that needed to be filledby the end of the year. Munster believes that's evidence Apple willlaunch a new tablet PC in early 2010.

"We expect the tablet hardware to be similar to an iPod touch,but larger and we expect the key differentiator of the device to beits software," Munster said, adding that the software couldresemble a version of the Mac operating system used in the iPhone,and also provide access to the iPhone's popular App Store.

Munster estimates that an Apple tablet device will probably costaround $600, placing it between the highest-end iPod touch at $399and the MacBook, which starts at $999.

At $600, Munster calculates that sales of 2 million Mac tabletscould add $1.2 billion to Apple's sales next year.

"Apple needs to introduce lower-priced offerings into itsnotebook lineup," said Toni Sacconaghi, who covers Apple forBernstein Research. "Small changes in price can meaningfully expandApple's addressable market."

How low Apple is willing to go on pricehas been debated for years, and probably will be even more so nowthat the company has seen rivals such as Hewlett-Packard Co./quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 44.12, +0.03, +0.07%) , Dell Inc./quotes/comstock/15*!dell/quotes/nls/dell (DELL 14.29, +0.09, +0.63%) , and Acer Inc.claim success with smaller netbooks.

Apple officials have been unwilling to discuss publicly the ideaof something like a netbook, claiming that such a product woulddilute the value of the Mac brand to a point where putting out anetbook would never happen under the current corporate regime.

"For us, it is about doing great products," Apple ChiefOperating officer Tim Cook said during the company's quarterlyearnings conference call in April. "And when I look at what isbeing sold in the netbook space today, I see cramped keyboards,terrible software and junky hardware. And not something we wouldput the Mac brand on."

But the move to a tablet or netbook device may be necessary forApple to maintain some of its cachet with students and customerslooking for more capabilities in their mobile computing devices, aswell as to counter a leveling-off of its notebook sales.

Sacconaghi, of Bernstein Research, said Apple's share of thenotebook market "has largely plateaued over the last four to sixquarters," and began losing some market share during the secondquarter of this year. Sacconaghi says the recent notebook datasuggests the market for high-end laptops, which cost $1,000 ormore, has been showing signs of declining, and Apple is approaching"share saturation" in its high-end customer base in the U.S.

Shaw Wu, of Kaufman Bros., said Apple may have seen the need toget into the netbook, or tablet market, before it's too late. Wusaid sources with Asian computer manufacturers said Apple has beenbuying up touch screens in various sizes ranging from 4 inches to10- and 12-inch models to determine what form factor would workbest in a Mac tablet.

Whether Apple gets the new devices out in time for the holidayshopping season or pushes the release of a tablet into next yearremains the key question.

"As usual, timing is always tough to pinpoint as Apple works onits own schedule," Wu said.

Rex Crum is a reporter forMarketWatch in San Francisco.

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