Apple iPad 2 a Strong Second Act, But No Competition Killer: Analysts

The Apple iPad 2 is lighter, thinner faster and chock full of features that were missing from the original. It's a sound upgrade but not a game changer, say analysts.

The Apple iPad's success launched a market that Apple's PC and smartphone competitors have scrambled to join. Despite the competition, the iPad continues to hold more than 90 percent of the worldwide tablet market share, a percentage that analysts say will eventually erode.

With the introduction of the thinner, lighter, faster and more feature-rich iPad 2 March 2, did Apple significantly fortify its standing?

Not really, say analysts.

Jeff Orr, with ABI Research, says the added features have simply made the iPad 2 better able to compete against the aggressive efforts of Motorola, Samsung, Hewlett-Packard and the like.

"Competitively, the addition of video cameras, a dual-core processor and HDMI [High-Definition Multimedia Interface] video output keeps iPad 2 in the running with other media tablets," Orr wrote in a March 2 research note. "Apple's content ecosystem and integration with other Apple products remains a point of differentiation for the company."

Still, Orr added that ABI doesn't expect Apple to maintain its 2010 market share indefinitely.

Technology Business Research analyst Ken Hyers likewise doesn't believe the iPad 2 rings a death knell for any Apple competitors.

"The Apple ecosystem offers a lot of value to its customers, developers and accessory manufacturers, particularly in terms of consistency of experience, due to the amount of control Apple exerts over the ecosystem," Hyers told eWEEK.

"This comes at a cost as some customers and developers bristle at the amount of control that Apple wields. From a developer perspective, Android is open-source and it's easier to develop apps for Android devices. For hardware developers, it's straightforward to build whatever device they want using Android. Look at the Xoom," Hyers said.

Where Apple has the competition beat, Hyers added, is in pricing and in offering a consistent experience. "I think that what will happen is a continuation of what we've seen so far: Apple fans will continue to buy Apple, while tech-oriented consumers will buy Android." Plus, he added, "Future Android tablets will likely push the envelope even further."

Analyst J. Gold, with J. Gold Associates, called the iPad 2's added features-a dual-core processor, better graphics, a programmable button-"expected." Further, he noted that what was still missing from the iPad 2-Flash support-makes it a key differentiator for RIM's PlayBook and Android-running tablets.

"Despite Apple's claims, Flash is and will be important on the Internet for many years," Gold said in a research note, following Apple's announcement.

Noting that Apple kept the price the same and that the delivery date is quickly approaching, Gold added that Apple fans will likely want to upgrade or finally get themselves an iPad. "But I don't see any overwhelmingly compelling capabilities that would make people sitting on the tablet fence go out and have to buy one, despite some attractive apps," Gold wrote.

Like Hyers, Gold pointed to Motorola's upcoming contribution to the market. "I don't see this as heads above the competition (especially the Xoom) right now," said Gold. "Apple didn't really move the bar all that much."

However, Steve Jobs took a moment during his introduction of the iPad 2 to take what seemed a jab at Motorola, which will retail the Xoom for $799. "Some folks out there are saying they're only a little bit more expensive than us," Jobs said, according to a play-by-play transcript from Engadget. "When you look at this [price] matrix, five of these six are less than $799."

Forrester analyst Sarah Rotman Epps says that while the game is far from over, Apple remains king of the hill-whether it's an eroding one or not.

"Apple still defines the tablet market, with a product consumers will desire at a price that's hard to beat," she wrote in a March 2 blog post.

That "desire," she continued, is no small part of Apple's strategy. The iPad 2 feels good, looks good-it comes in a number of colors and has a "smart cover" that snaps into place, reducing mucky fingerprint smudges-and its applications trigger emotional responses, whether by video-chatting with loved ones, editing home movies or experimenting with GarageBand and actually sounding good doing it.

"In a post-PC world, consumers have a more intimate relationship with their devices," Rotman Epps continued, pointing out that Apple's investment in its retail stores has paid off, as a Forrester study has shown that consumers "are willing to pay more for Apple products because of their perceptions that the service (real humans accessible in any Apple Store) is built into the price of the device. In-store service boosts Apple's pricing power."

Jobs also said as much during his presentation. Talking up the success of the original iPad, he explained, "One of the things that has helped up roll this out so fast is our retail stores. They were built for moments like this. We have hundreds of Apple stores now. Without them, we wouldn't have been successful."

Competing products from Motorola, RIM, HP and others consequently have "fatally flawed price and distribution strategies," wrote Rotman Epps, adding that of the 24.1 million tablets Forrester expects U.S. consumers to purchase in 2011, at least 20 million will be iPads.

"Apple understands desire," Epps wrote.