Published: Saturday, 19 Mar 2011 11:41 AM ET By: Chris Morris Special to CNBC.com
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Black and white versions of the new iPad 2.
There's no doubt that Apple's latest iteration of the iPad is a hit with consumers. Day one sales are estimated at 500,000 or above and people are still lining up outside their nearest Apple store to get their hands on one.
But the iPad 2 is entering a much different world than its predecessor. And while Apple still holds a commanding market share position, it may be in for a much tougher fight this time around.
Competitors have had an opportunity to examine Apple's [AAPL 339.19 -2.01 (-0.59%) ] weaknesses with the original iPad—and the new features of the current model were hardly a surprise to anyone. Google, meanwhile, released Android 3.0 in February, the first of its mobile operating systems that was built specifically for tablet computers.
"We're really just seeing the cutting edge of the emergence of truly competitive products to the iPad," says Rhoda Alexander, an analyst with IHS iSuppli "And arguably, it's not a true head-to-head comparison at this point because of price.
The Motorola Xoom won widespread acclaim at this year's Consumer Electronics Show and was touted as a potentially formidable competitor to the iPad, but when the prices were announced, that buzz took a hit. $799 for an unsubsidized version (the truest comparison to an iPad's pricing) was dubbed prohibitively expensive – and consumers have so far basically ignored the device.
The problem with that comparison is it was pitting a single product against Apple's six versions of the iPad. While people remember the $499 price of the stripped down version, they rarely think about the high-end $829 model.
"Apple was priced strategically in that it has an entry level product at $499," says Alexander, who expects a second wave of less expensive tablets from several manufacturers in the back half of this year. "[That] is an absolutely critical price point for the consumer. Part of the difficulty with the iPad 2 coming in is now there's iPad 1 for $399 out there, so now you have a lower barrier that companies are battling."
Android Tablets - The Strongest Rival to iPad
Eric Bleeker, Analyst at The Motley Fool says Apple still has the edge with the iPad 2. But he thinks the Android system poses the greatest threat to Apple.
That's not stopping a new wave of competition from coming. Samsung, which had marginal (at best) success with its first Galaxy Tab line recently introduced a new model, with a larger screen and using Android 3.0, and is also expected to unveil a new 8.9-inch addition at the 2011 CTIA Wireless convention this week.
HTC is also readying its first entry in the space, with details and a carrier partner likely to be named at CTIA. (The grapevine suggests it will use the company's EVO product line name.) And, come June, Asus will release its Eee Pad MeMO, which blends the tablet with the smart phone.
The big guns will come from HP, which is readying its TouchPad tablet for a summer release, and Research in Motion's Playbook, which is hoping to capitalized on that company's close relationship with businesses through its Blackberry smart phone.
For any of those tablets to succeed, though, they need to find a way to overcome consumer's natural tendency to follow the buzz. Apple set the standard with the iPad and those long lines tend to create demand even among fence sitters.
The company also has the advantage when it comes to content. Beyond Apple's ties with the music, film and television industries, the wide variety of programs in the app store far outstrip what's available for other tablets so far.
"You might be competing head to head on hardware, but it's not [an even battle] when you look at programs," says Alexander.
Gartner expects total tablet shipments to top 55 million by the end of the year and 100 million by the end of 2012. So while it’s still likely to be a fight for second place for a while, there's still good reason for tablet manufacturers to move forward.
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