Apple Tablet AAPL (iSlate)
The blogosphere, and the news industry, has been all over Apple Computer’s supposed new product: an Apple branded tablet computer. Tablets, or computers that run on a touch screen system, were first tested in the early 2000s but never really caught on. I’ll examine Apple’s newest product, as well as the possibility this could be a hit product for Apple.
Examining Apple’s Business Model
Apple Computer (AAPL) has always derived its thickest profit margins from software, not from hardware. Its computers run its own proprietary operating system which Apple does not license to other hardware makers, thus ensuring itself a monopoly. As such, Apple prices its computers well over the typical hardware+software($50-100)+assembly ($20-30) that most expect. Many of its computers sell for $200+ over the cost of the hardware/software. Of course, most of this is due to the fact there is no other way (unless you have extensive computer experience) to buy Apple’s software and put it on a non-Apple branded computer.
Digital Products
It isn’t just software that has made Apple piles of money in the 2000’s. Applications, games and other digital products including music files have been absolutely HUGE for Apple’s profit margins, and it appears it will be central in its newest tablet product. Apple’s own music store, iTunes, has sold over 8.1 BILLION songs at an average rate of 10.1 million per day, all priced from $.79-.99. After the iPod, Apple released the iPhone and the iPod Touch which offer both free and paid applications that run on the device itself. The Apple App store sold 1 billion Apps as of April 2009, then doubled that to 2 billion by September 2009. No new numbers are available, however, after the long Christmas season, it is expected that Apple has neared 3 billion applications sold, of which Apple keeps a full 30% of the price.
Apple’s Newest Venture (iSlate)
It is rumored the new product will be known as the iSlate, however, in the world of tech, rumors aren’t always spot on at launch. (Another popular product, the Nintendo Wii, was known as the Revolution long before it was rebranded.) Apple is also rumored (as per the Wall Street Journal, more reliable 
) to be in discussion with HarperCollins to allow exclusive rights to distribute free, and paid for, ebooks on its new tablet.
Two Failed Products in One?
Though I am not disputing Apple’s ability to market, and sell, a consumer product, I am doubting their ability to market a tablet computer (which has previously failed miserably) as an ebook reader. Amazon has come off with relatively no success with the Kindle, and Microsoft’s tablet platform never really caught on.
Digital Content is Make or Break
Apple is expected to launch the iSlate on January 27, 2010, at which point the world will know whether or not this product will have any effect on Apple’s stock price. If the device is limited in its computing capacity in such a way that the product allows for application downloads via an app store, and ebooks through an exclusive ebook store, this could be a huge driver of digital content sales growth for Apple and have huge effects on its bottomline. If this tablet turns out to be yet another personal computer, expect minimal sales, and minimal growth in earnings for Apple.
