CES: Analysts grow skeptical of iPad competitors due to iTunes

iPad may dominate tablets as iPod did MP3 players

Shaw Wu, Senior Research Analyst at Kaufman Bros, wrote in a note that after "investor meetings with the managements of Lenovo, HP, Synaptics and Toshiba at the CES trade show in Las Vegas," and having spent some time with product and marketing specialists at Samsung and Motorola Mobility, his firm has concluded that "tablets expectations may prove too high."

"One of the key focuses at the show is of course tablets," Wu wrote, "with many trying to come up with an answer to the strong selling iPad. This may sound controversial, but we are concerned that expectations may be set too high by market research firms with aggressive forecasts."

Wu noted that "we are not convinced that tablets outside of the iPad will see high volume success. The reason is that we believe success is dependent on: 1) the number and quality of apps and 2) a rich content library including music, movies, TV shows, e-books, podcasts and photos, such as that offered and managed by iTunes. To us, the iPad appears similar to the iPod business where one vendor (that being Apple) is likely to end up dominating the space."

Toshiba joining tablet, app store bandwagon

In the same report, Wu noted that Toshiba will be bringing an Android tablet to market "using similar components to the Motorola Xoom including Android 3.0 Honeycomb software and a Tegra 2 processor and is on track to launch in the Spring."

The company told Kaufman Bros. that "its strength in the channel could prove to be a key differentiator in doing better in tablets relative to competitors." The report added that Toshiba "sees a strategy toward driving a universal app store across its PC, tablet, and TV business which we believe could be a key differentiator."

An Android site reported in November that Toshiba would be launching an Android Appstore with Handster, an online website that has been selling Windows Mobile, Java, Symbian, BlackBerry and Android apps. It published an email from Handster to its Android developer mailing list, saying, "Do you have any new PAID apps that are not published in your Handster account yet? Please let me know if you wish to submit your paid apps for Toshiba appstore. You can login to your Handster account and upload paid apps. Or you can also send APK files for paid apps to me in ZIP and I will add them to your account."

Toshiba currently operates "AppPlace," which offers "cloud based" (web) apps for Toshiba PC users which are sold on a subscription basis $5 to $10 per month. The company also opened a Windows CE app store for its JournE Touch web tablet in October 2009, but it appears it has since been shut down along with Microsoft's Windows CE as a tablet platform.

Motorola Xoom "reasonable," but lacks iTunes, Apple experience

Brian White, the Senior Research Analyst at Ticonderoga Securities, said that Motorola's new Xoom (below), unveiled at CES, "seemed reasonable to us but wasn't our cup of tea as we still favor Apple's iPad and look forward to the second generation."

White noted that "the 10.1 inch (vs. 9.7 inch for iPad) Xoom will include the new Android 3.0 Honeycomb operating system (vs. iOS 4.2 for iPad) and 1GHz Nvidia Tegra 2 dual core processor (vs. A4 1 GHz for iPad). Keep in mind, we expect the second generation iPad to be released in March/April with enhanced features and performance."

Echoing Wu's comments, White wrote, "as we talk through CES and analyzed the various tablets, we are reminded that one of the most attractive features of the iPad is the seamless connection within Apple's digital ecosystem that extends across devices, combined with Apple's focus on aesthetics. Competitors will try to replicate Apple's ecosystem but we believe most will fail to provide the Apple experience."

PlayBook demo wows Mike Abramsky, Wu not sold

A third note, by RBC Capital Markets's Mike Abramsky, did make favorable mention of RIM's new PlayBook (below), noting that in a demo, "PlayBook is simultaneously running multiple processor-intensive apps like a Quake 3D game, HD video playback, web browsing, and several 3D demos, with no loss of fidelity.

"This desktop-like performance is possible due to PlayBook's QNX-based OS and architecture, and may be difficult for iOS and Android to duplicate," he stated.

While the PlayBook isn't yet finished, performance hasn't been the main target of its doubters. Instead, Apple's chief executive Steve Jobs has criticized competitors' decisions to use 7 inch screens in their attempts to match Apple on price, while analysts, including Wu, have warned of engineering problems including "relatively poor battery life of a few hours," which he blamed on the PlayBook's OS.

"QNX wasn't originally designed for mobile environments," Wu stated, adding that that developers are "questioning the wisdom" of RIM maintaining two operating systems, BlackBerry OS 6 and QNX.

RIM denied experiencing any engineering problems, saying that it "is on track with its schedule to optimize the BlackBerry PlayBook’s battery life and looks forward to providing customers with a professional grade tablet that offers superior performance with comparable battery life.”

The company's co chief executive Jim Balsillie recently touted the PlayBook as "way ahead" of the iPad. "I think the PlayBook redefines what a tablet should do," Balsillie said, asserting that the tablet's redefinition involves the web, not apps.

Earlier this week, Wu again repeated that the PlayBook would be unlikely to match the iPad's ten hour battery unless it added a larger battery.

Wu noted that Apple engineers its own battery chemistry and designs many of its own semiconductors, allowing for power optimization that competitors like RIM cannot yet compete with. Wu also noted the PlayBook's inclusion of Adobe Flash, which he said could be a major factor in the battery life of the PlayBook.