Why the Older iPad is the New Gateway Drug to a Post-PC Future

Friday Mar 9th 2012 by Adrian Kingsley-Hughes
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Microsoft is gambling heavily on the tablet market, yet Apple is creating a price point advantage.

Apple and Microsoft are once again locked in a battle, but this time around it isn't for dominance in the desktop or notebook markets, but instead for supremacy in a new market that potentially threatens the entire PC industry – the post PC market.

And right now, Apple looks like it is set to control this ecosystem and dictate all the rules, while Microsoft is left floundering without a clear strategy.

The key to Apple's possible future domination of this new ecosystem – the iPad.

Apple's iPad announcement on March 7 was all about what the company calls the “post-PC” era, a time when personal (and more personalized) mobile devices such as smartphones and tablets replace traditional hardware (PCs) to become the future of computing. And what's more, Apple thinks that it is in a strong commanding position to take control of this market.

“Apple has its feet in post-PC future,” crowed Apple chief executive Tim Cook at a press conference in San Francisco. “We think the iPad is the poster child of the post-PC world.”

Let's take a look at how Apple has taken hold of the post-PC market so far. To date, Apple has sold 172 million post-PC devices (iPhones, iPads and iPod touches), shipping a colossal 62 million of them in the last quarter alone. Sales of these post-PC units accounted for 76 percent of the company's Q4 2011 revenue, a figure that is only going to increase in 2012.

How big a player is Apple when it comes to post-PC devices?

Big. Very big. In fact, it's so big that if the iPad were a PC, Apple would now be selling more unit than any other PC maker in the world.

In the last quarter alone Apple sold 15.4 million iPads. Its nearest PC OEM rival, HP, sold 15.1 million PCs. The next nearest rival, Lenovo, sold 13 million, while Dell only managed to shift 11.9 million PCs. And remember, Apple has accomplished this with a product that was first bought to market less than two years ago, and with a product that many pundits expected not only to fail, but to fail spectacularly.

It's also worth bearing in mind that Microsoft has been trying to break into the tablet market for over a decade, with little in the way of success to show for its efforts.

It could be argued that the post-PC future that Cook was talking about is already here.

A New Player Emerging

Currently there are two players in the post-PC ecosystem. There's Apple with its iOS devices, and there's Android, along with the myriad of OEMs making smartphone and tablets powered by this platform.

While Android has the lead when it comes to volume of units shipped, these sales are split across a crowd of OEMs all fighting against each other for consumer's wallets. This infighting among the players and the lack of differentiation between the different Android smartphones and tablets means that they're in a race to the bottom in terms of price. Consequently, profit margins are razor thin.

But pretty soon there's going to be a new player: Microsoft.

The Redmond giant is hoping to grab a piece of the post-PC era action by shoehorning Windows 8 onto ARM-based tablets. Microsoft is taking a massive gamble on this, choosing to change its entire Windows operating system in the hope of making it more touch-friendly.

It's a massive gamble because Microsoft is pushing their new touch-optimized user interface not only onto tablet users and onto those with touch hardware, but onto everyone, including those sitting in front of a desktop system with a keyboard and mouse attached.

Microsoft is serious about entering the post-PC era, but Apple isn't sitting still. So far, Apple has relied on the iPhone and the cheaper iPod touch to give it leverage into the post-PC ecosystem (yes, it comes as a surprise to some, but the iPod touch is a post-PC device).

The iPhone was the jewel in the crown, and the iPod touch was there for those who either didn't want or couldn't afford an iPhone. It was a clever strategy because it covered both the high-end market (iPhone) and the mid-range market (iPod touch).

And for many, the iPod touch was the gateway drug into buying an iPhone. It was a cheap way to experience what an iPhone could offer but without the hassles of a data plan or contract.

And it worked.

Old iPad: New Gateway Drug

But now Apple has changed the gateway drug. But it's not the new iPad (aka iPad 3) that's the new drug luring people into a post-PC era. It's the cheaper iPad 2 that was announced.

The new iPad might have a really cool 'retina display' LCD panel, and a nifty quad-core graphics processor, but the iPad 2 has something even more compelling – a lower price tag.

At $399 for the WiFi version of the iPad 2 (compared to $499 for the cheapest in the newer range), this is going to be hard for people to resist, and Apple knows this. At the announcement Apple's senior vice president of worldwide marketing Phil Schiller himself said that “now there really is something for everyone.”

This $100 price drop for the iPad 2 will also appeal to volume buyers. With the iPad 2, buyers are essentially getting five iPad 2s for the price of four of the new iPads.

Apple might have been talking up the new iPad at the press event, but the key to Apple dominating the post-PC ecosystem is having a low-priced tablet out there. And now Apple has one, and it's at a price point where tablet OEMs building hardware for Windows 8 will find it very hard to match.

And OEM’s price isn't right, then Windows 8 tablets could well be toast before they even hit the shelves, and Apple will control what happens in the post-PC world for some time to come.

 

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