Why Apple tablet may not be the gadget of the future

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- Gadget lovers are waiting with bated breath for the much-anticipated unveiling of the Apple tablet, but don't expect it to take the world by storm the way the iPod and iPhone did.

"There will be a strong interest in it, but it won't be the wave of the future," said James Brehm, analyst at Frost & Sullivan.

Tablet computers are hardly a new concept. In fact, Apple already brought a tablet device to the market in 1993 in the form of the Newton MessagePad. Despite a ton of hype, Apple (AAPL, Fortune 500) only sold a few hundred thousand Newtons in the five short years it was on the market.

Other tablet-like devices have also fizzled. The Compaq iPAQ and the Palm (PALM) Pilot were quickly replaced by smart phones. Consumers can find some modern-day "tablets" in the form of notebook computers with swiveling monitors, but they're clunky, expensive and haven't taken off.

The problem with handheld tablets is that they're middle-of-the-road devices. They have better functionality than smaller gadgets but don't have enough functionality to replace your PC.

Though Apple hasn't released any details about its tablet, analysts who have been briefed on the device say it will run apps like the iPhone and iPod Touch do, but the tablet will be better suited for watching movies and reading. According to a New York Times report, Apple will unveil a tablet on Jan. 26.

"The Apple tablet will have a beautiful user interface, it will have a pleasing aesthetic and will be marketed well," said Chris Collins, senior consumer research analyst at Yankee Group. "But at the end of the day, we're still talking about a smart phone with a bigger screen."

Collins anticipates the tablet will initially take off with lots of excitement, but ultimately he expects it will help accelerate innovation in smaller gadgets, like smartphones, and bring down prices for PCs.

Such was the fate of netbooks. Shipments of the mini, ultra-portable notebook computers soared in 2008 and earlier this year. However, sales have cooled off as full-sized notebook prices dropped, and smart phone performance grew, according to John Jacobs, NPD Group's director of notebook market research. As a result, NPD expects netbook shipments to grow just 19% in 2010.

"Netbooks won the battle but lost the war," said Collins. "Eventually, people either went to a smartphone or a notebook. Tablets will also generate a lot of interest initially, but they will ultimately suffer a similar fate."

Too pricey?

Tablet technology doesn't come cheap. Creating screens that allow users to write on them is a costly endeavor, and swivel-monitor notebooks tend to run several hundred dollars more than non-tablet peers.

Apple will likely need to charge around $800 for the device, analysts say, which could relegate the tablet to "niche" status. That $800 price point could be too rich for some and others may opt to spend just a little more for a full-function laptop computer.

Brehm and Collins argued that the there will be some compelling uses for the tablet, including note-taking for students or examining electronic health records for physicians. Apple fans will also bite because, well, it's an Apple product, and it's bound to be really cool.

"The market will be there, but this will definitely be more of a niche product," said Brehm, who was Gateway's tablet product manager a decade ago.

Apple may pull it off

The tablet will have to offer more than the iPhone or iPod Touch to be successful, say analysts.

"They have to trump themselves," said Laura DiDio, principal analyst at ITIC. "That will be difficult, but the tablet shouldn't only be an iPhone with a bigger screen. It's going to have to bring something new to the table to be successful."

DiDio said the tablet will have a 10-inch to 12-inch screen and a high-end graphics card that will enable stunning resolution -- even more so than the iPhone and iPod Touch. She said the device will come in several different models that offer varieties of Internet connections, such as Wi-Fi or 3G, perhaps through a contract with AT&T (T, Fortune 500). A Web cam will also be available for video conferencing.

Is that enough to change the gadget game? Maybe. Analysts counted out Apple before the iPod changed the music player and before the iPhone re-imagined the smartphone.

Likewise, it may be too soon to count out the long-awaited tablet. Even tablet detractors know better than to dismiss a Steve Jobs creation too quickly.

"There have been tablets before, and they did not take off," said Brehm. "There had been MP3 players before 2001 too, but we hadn't seen anything like the iPod before." To top of page

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