Sizing up the Tablet Competition

TOM HUDSON: Tom Forte is an analyst at Telsey Advisory Group. He joins us tonight from the NASDAQ. So, Tom, we got a new iPad, the iPad 3 we’ll call it — keeping up the growth rate. Can it keep up the growth rates we’ve seen?

TOM FORTE, INTERNET ANALYST, TELSEY ADVISORY GROUP: I think the answer is yes, it can keep up the growth rate. There’s enough innovation with this new device both with a better resolution screen and ability to get on a higher speed 4G network, instead of 3G, that the enable Apple (NASDAQ:AAPL) to continue to maintain its market share in the tablet market and continue its growth.

HUDSON: Let’s talk about that market share. In 2010, Apple (NASDAQ:AAPL) essentially had the tablet market to itself, 94 percent penetration. Now, at the end of last year, that had been cut down to 58 percent. Of course, the overall pie has grown significantly. What does it need to do to continue to maintain that market share?

FORTE: So, to me, I think a lot of pressure is going to come from
underneath and from above. Underneath, I mean, the $199 Barnes & Noble
(NYSE:BKS) Nook and the Kindle Fire for $199. So, to that
extent, offering now the whole generation iPad 2 at a lower price point I
think will help in that regard. And then the pressure from above is the Ultrabook.

So, I really don’t think there’s another premium tablet that can
compare to the iPad, but to the extent you can get a lightweight computer
for $1,000, I think that kind of puts the Apple (NASDAQ:AAPL) in the box,
so to speak.

HUDSON: Yes. You mention the iPad 2, it’s going to continue to
manufacture and sell those, but it has cut the price to maintain the share.
Who loses in all of this? You mentioned the Nook, and the Kindle is
out there from Amazon. Where does the market come from?

FORTE: So, I think the market comes from other tablet, device
manufacturers outside of Barnes & Noble (NYSE:BKS) and outside of
Amazon. A $200 price difference between the iPad 2 at $399, and the Nook
and Kindle Fire at $199 is still enough to motivate the low-end consumer to
buy the less expensive device.

I would argue that Motorola and some of the other tablet device
manufactures could be giving up some incremental market share to Apple
(NASDAQ:AAPL) on this one.

HUDSON: We can see the Apple (NASDAQ:AAPL) share price right behind
your shoulder. The iPad 4G runs $629. Tonight, Apple’s shares at $530.
So, do you buy the new iPad or perhaps one share of Apple (NASDAQ:AAPL)?

FORTE: Well, if you’re giving me that choice, it’s hard to pass up
one share of Apple (NASDAQ:AAPL).

HUDSON: Is that right?

FORTE: Yes.

HUDSON: So, you got a price target?

FORTE: Well, I’ll tell you that our price target is under review.
Our prior price target was $575 to $585. But like I said, that target is
under review.

HUDSON: Likely to go higher. Do you own Apple (NASDAQ:AAPL)? Do you
own shares?

FORTE: I do not own any shares. No.

HUDSON: Do you own an iPad?

FORTE: I do.

HUDSON: All right. Tom Forte with us tonight. He’s with Telsey
Advisory Group.


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