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Article / 26 March 2012 at 13:23 GMT

Will Windows 8 threaten the iPad's dominance?

Peter Garnry Peter Garnry
Head of Equity Strategy / Saxo Bank
Denmark

2013 is shaping up to be the true year of the tablet war from manufacturer’s point of view. While 2010 and 2011 have been dominated by Apple, the future will be much different. I believe that Apple should easily be able to defend a large part of its market, but the other tablet makers will be heavily competing on price, technology, accessibility, and operating systems.

The most important development: the entry of Microsoft's Windows 8 tablets into the market in late 2012 and beyond.

Two-way market becomes a three-way market: Android may move downmarket

Apple has been extremely successful at defining the new tablet computing market and at the same time building an extremely strong brand following. As it currently stands Apple had a Q4-11 tablet market share of 57% while a mix of Amazon, Samsung, Barnes & Noble and a slew of others had the rest of the market (see chart 1). 

Tablet market share and shipments

From the standpoint of operating systems, Apple has a market share of 57% while Android had a 39% market share. But Windows 8 has the potential to create a 3 way fight between operating systems and I believe that this will most likely impact the mid-price to higher price tablets.

Windows 8 has primarily been built as an operating system for small devices which can be synched across devices, much like the iOS has done. This is where Windows 8 can get a huge leg up on the Google's Android platform. Because the Android software is open source and free, the lower end tablets will most likely benefit from using the Android software to keep their unit prices low (depending on how Microsoft prices its Windows 8 OS for tablets and smartphones), while Window 8 might capture the mid to higher price market segmentation.

Windows entrenched in corporations

Windows 8 has as a much better chance of capturing the corporate tablet market than the iOS or Android. Because Windows 8 will be integrated across platforms, and hence work PCs, Windows 8 should be a strong contender to compete for the emerging corporate tablet market.

Many manufacturers are planning on focusing on Windows 8 tablets, with Nokia going exclusively for Windows 8. Dell has kept relatively quiet but given its strategy of going for the corporate market, it is to be expected that Dell will mostly focus on the Windows 8 operating system. HP has also indicated they will focus on Windows tablets to stay away from the fierce competition of Android tablets. So while manufacturers will compete on technology, pricing and so on they will also be competing on operating systems.

Should Windows 8 become a hit, any manufacturer who is not carrying Windows 8 might be a at disadvantage. But if Windows 8 fails, companies that depend on the operating system, like Nokia, will be the first casualty.

So who stands the benefit from all this?

Since Windows has currently no tablet presence and extremely minimal smartphone presence, I believe that it is mostly only upside for Microsoft since they will not have to compete on the hardware side. The hardware side should become extremely competitive with Dell and Nokia being highly dependent on Windows 8 to boost stagnant sales. As with the PC and portable market, expect a price war to ensue with consumers to benefit.

From the investing side of things, Microsoft should benefit if it does not drop the ball and I believe that Apple will continue to roll along for the next couple of years as the major tablet players get established. 

I have included a list of past Apple articles for readers who are interested...

1. The size of Apple and its cash in relative terms
2. Apple: Wow – iPhone powers ahead!
3. Apple Earnings: Another miss in the making?
4. Apple Q4 earnings preview; no speed bumps expected yet
5. Is Apple like Microsoft or more like Samsung/Nokia?

and Microsoft articles...

1. Is Windows 8 a Microsoft buying opportunity?
2. The hazaras of investing in small tech companies
3. Microsoft shares up 25% in past 3 months despite concerns!
4. Tech stocks - the next bull rally?

2y
MarketShark MarketShark
Do you think Microsoft can find a way to make new generation of devices clunky and unappealing? They were smart to go into the corporate market, so employees would be forced to use their products. Otherwise nobody would.
2y
sondz sondz
On paper putting W8 on a tablet sounds like a great idea: leverave a single product across mtiple devices. The trouble is windos has onpy ever run on x86 chips... Which run hot add burn through power. iOS devices use ARM chips which process different code. So MS has to support 2 totaly seperate code bases. Much like iOS and OSX, and i surpose Android and ChromeOS... What hapened to that!?
2y
Matt Bolduc Matt Bolduc
The problem will definitely fall on the backwards capability of apps if an ARM pad is chosen, or whether the shorter battery life and the higher cost if the the x86 is chosen. My guess is that the ARM will most likely slowly die off for Windows 8 tablets anyways. There is something like 40 x86 tablets expected to be out once W8 launches and only 5 ARM tablets... It does make you think what was the point of even trying out ARM for Windows 8 from Microsoft's point of view.
2y
sondz sondz
I wouldn't be so sure about ARM's slow decline, there are rumours of Apple using ARM chips for their notebooks, so it looks like the big boys are moving towards ARM rather than away. http://semiaccurate.com/2011/05/05/apple-dumps-intel-from-laptop-lines/ ... but then I went to school in the UK in the 80s, so I'm always gonna be patriotic... I love those beige bad boys!
2y
Matt Bolduc Matt Bolduc
I was just talking about from a Microsoft perspective, but I didnt know that Apple was going for ARM notebooks, pretty interesting...

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