The Investing “Playbook” For Tablets Posted by Tech Insidron April 26th, 2011
Despite the runaway growth in the tablet market, the iPad is still the only tablet to sell in volume. Apple’s dominance in this market is unmatched having already sold 7 million tablets in 2010. A host of competitors, including the $RIMM Playbook and Motorola Xoom, have stepped up to the plate and delivered half-baked products but so far it’s a one horse race.
Although Apple ( $AAPL ) is currently dominating the tablet market, this could all change very quickly as an onslaught of new Android Honeycomb tablets are set to hit the market in the coming weeks. Sony recently announced their latest tablet, which will feature a 10.1″ screen and an Android Honeycomb OS. Asus is also set to release their Asus EEE Transformer tab, which is a hybrid between a tablet and a netbook. Rumors of a Lenovo tablet also surfaced over the weekend as well. The competition is heating up and these OEM’s are hungry to gain inroads into the lucrative tablet market.
Apple has done an excellent job executing so far in the tablet market, but there is always room for more competition even if it’s strictly on price. The tablet market is already massive and poised to grow in the coming years. Gartner, a well respected research firm, is forecasting that 70 million tablets will be sold in 2011, up from 17 million in 2010.
As you can see from Gartner’s projections, the share of Android tablets is expected to grow significantly in 2011. Apple has done a great job with this market, but 2011 will be the year that Android tablets gain momentum and become mainstream.
So how can you ride this tidal wave of momentum as an investor? Pretty simple actually… it’s all in the supply chain.
In my mind, the top beneficiaries of the shift to tablets are ARM Holdings, nVidia, and Broadcom. I currently hold long positions in all three of these companies and I think nVidia is by far the most undervalued of the group.
1.ARM Holdings – $ARMH : The most dominant player in the lucrative smartphone / tablet CPU space. ARM designs the CPU’s that go inside the top consumer electronics gadgets including smartphones, tablets, and other devices. ARM operates on a lean business model where they license out their chip designs on a per unit basis. The volume of tablet sales has a direct effect on ARMH’s revenues… I see much more upside ahead for this chipmaker.
2.nVidia – $NVDA : One of the top companies in the graphics space. The nVidia Tegra 2 graphics chip is a gamechanging technology that allows tablets to play 1080P HD video and other graphic-intensive tasks seamlessly. The Blackberry playbook and Motorola Xoom are two popular gadgets that use this technology. Chosen as the reference GPU chip for Honeycomb, the nVidia Tegra 2 provides the graphics capabilities for nearly all of the new Android tablets.
3.Broadcom – $BRCM : The leader in multi-functional Wi-Fi, Bluetooth, and GPS chips for small form factors. Broadcom silicon powers the Wi-Fi functionality for the iPad 2 and more design wins are ahead for Android tablets. I think Broadcom is a great option in this space because they are platform diagnositic. As the tablet market heats up, Broadcom will continue to be a top supplier for both Android Tablets and iPads.
Sony is the company that BRCM hinted in its Q1 earnings CC.
TOKYO—Sony Corp. plans to introduce two tablets later this year running Google Inc.'s Android operating system, more than a year after Apple Inc. released the iPad and sparked the tablet-computer boom.
Sony is the latest competitor to offer products aimed at chipping away at the iPad's 80% share of the rapidly growing tablet market. Sony said Tuesday it aims to be the top seller of Android-based tablet computers by next year.
Sony unveils one of its two soon-to-be-released tablets, the S1.
Sony's two tablets, code-named S1 and S2, will be released sometime after the fall. The S1 has a typical tablet shape and tapers down from one thicker side. It has a 9.4-inch touch-screen display. The S2 is a cylindrical, clamshell device that opens and closes, with two 5.5-inch touch-screen displays.
Sony said the tablets will come with wireless connectivity through Wi-Fi or high-speed mobile-phone services. The company didn't specify what mobile carriers it plans to work with and offered no details on sales targets. It also didn't disclose pricing except to say that the tablets would be "competitive."
Sony also offered a preview of two new Vaio personal computers running Microsoft Corp.'s Windows operating system. The company briefly showed a picture of a Vaio Freestyle Hybrid PC, which looks like a tablet with a slide-out keyboard. Sony also displayed a thin Ultra Mobile PC. The company didn't offer details about the products except to say both are expected out before year-end.
Sony aims to position its tablet computers as do-all entertainment devices tapping into its network of video, music, electronic books and videogames. Under Chief Executive Howard Stringer, Sony has pursued a strategy of linking online services to its wide range of electronic devices.
Sony's new tablets will run the Android 3.0 Honeycomb operating system, which has been designed specifically to run on tablets. But the company's plans to debut the product after the autumn puts the product behind other non-Apple tablets running the same software.
Motorola Mobility Holdings Inc., with its Xoom device, introduced the world's first tablet running Honeycomb. Samsung Electronics Co., LG Electronics Inc. and others plan to beat Sony to the market with Honeycomb tablets.
Sony executive Kunimasa Suzuki displays the company's S1, which has a typical tablet shape and will be released after the fall. .Mr. Suzuki, who is in charge of Sony's mobile-devices strategy, said the company aims to win over customers with its unique design and technologies to speed Web browsing and response times. The S1 and S2 also will be able to send videos to Sony television sets and serve as remote controls for other Sony TV sets and other products.
Both devices will run Nvidia Inc.'s Tegra 2 processors.
"It's a wickedly difficult market and a lot of people are fighting for number two, but Sony has as good of a chance as anyone," said Jay Defibaugh, equities research director at MF Global FXA Securities in Tokyo. "They will need to differentiate in a sea of new models flooding the market and they seem aware of that."
The global tablet market is expected to nearly quadruple this year to about 70 million units, expanding to almost 300 million by 2015, according to research firm Gartner. While two in every three tablets sold this year will be iPads, Gartner said, Android-based models are expected to whittle away at Apple's dominance. By 2015, Gartner forecasts that Apple will control 47% of the market to Android's 39%.