By arming a larger iPad with a 64-bit processor and a keyboard cover, Apple could crack the nascent 2-in-1 device market -- out-Surface Microsoft and its OEM partners as they push the concept of tablet-as-notebook, notebook-as-tablet -- if it decides the effort's worthwhile, a noted analyst said today.
"Apple's not driven by what the competition does," said Tim Bajarin, founder of Creative Strategies and an industry analyst since 1981, or almost as long as Apple and Microsoft have been around. "But history says if Apple sees a segment of the market, and they believe they can improve on it, they consider it."
Bajarin was reacting to speculation that started with several Wall Street analysts trying to make sense of Apple's move to the 64-bit A7 system-on-a-chip (SoC) in the iPhone 5S, its flagship smartphone. Like the industry analysts Computerworld spoke with a month ago about the A7 and its long-term implications for the Cupertino, Calif. company, financial experts theorized that Apple could use the more powerful ARM-based processor, more system memory -- which a 64-bit CPU can address -- a keyboard and perhaps even a larger screen to transform the current iPad into a convertible device. The resulting device could entertain like a tablet and produce like an ultra-light notebook, depending on the circumstances.
More recently, other pundits -- mostly bloggers -- have picked up on the idea, adding fuel to the hypothetical fire.
"We're not picking anything up from the [supply] channel" that Apple will actually make such a move in the short- or mid-term, Bajarin cautioned. "But they do look at markets if they see potential, look at the good and the bad about something that already exists, and if they can make it better, they do."
Apple does have a market to examine in this case.
Rival Microsoft has pinned high hopes on the tablet-notebook concept, betting that its Surface line will find hordes of customers eager for a single device to replace the two they own, even promoting the Surface Pro as a substitute for both an iPad and an Apple notebook. Microsoft's OEM (original equipment manufacturing) partners, like Lenovo and Dell, have also grabbed hold of the idea and released devices, called "convertibles," "hybrids" or "2-in-1s."
Even though Microsoft hasn't convinced many that the concept is worthwhile -- in an eight-month span that ended June 30, the company recorded Surface revenue of just $853 million, or less than Apple's iPad generated in a typical two-week stretch during the second quarter -- the company will stick with it: The Redmond, Wash. firm launched its second-generation Surface devices today. The devices, which start at $449 for the Windows RT-powered Surface 2 and $899 for the Windows 8 Pro-equipped Surface Pro 2, come minus a keyboard cover, -- an odd omission considering the use model. The keyboards cost between $80 and $130, putting a 64GB Surface Pro with the Touch Cover at $1,029, or close to double the current ASP (average selling price) of a Windows 8 touchscreen notebook.
Microsoft has not broken any records with the Surface, but it may be on to something. As tablets become more powerful, they become more able to serve as a user's single larger-format computer rather than as an adjunct, which is what they are today. Paired with a keyboard, a tablet doubles as an ultra-light notebook; married to a stationary keyboard and one or more monitors, it serves as the basis for a desktop system. On its own it's, well, a tablet.
"Consumers are relatively comfortable with a laptop and a tablet," said Bajarin. "The tablet augments the laptop, but they shift [usage] so that they spend about 80% of their time on the tablet. That's the consumer scenario, but business is different, with about 80% of the time spent on the laptop, because that's what they're paid to do."
But he believed people could be convinced otherwise. "Even though that's how they're used now, don't discount that [consumers] will think differently [in the future]." Bajarin said.
Apple executives, however, have gone on record disparaging the concept. A year ago, around the Surface's launch, CEO Tim Cook called it "a fairly compromised and confusing product," and in the next breath, compared it to "a car that flies and floats."
But pay no nevermind. "Apple wants to create products that consumers want," Bajarin said. "Jobs created products that he would want. That kind of configuration [of tablet and keyboard] could become of interest because they would like one," he continued, now referring to Apple's current top tier. "That would be the driver."
There's no direct evidence Cook and Co. are lusting after a Surface, or even an iPad with Surface-esque qualities. But some recent moves have been seen as clues by outsiders. That includes the decision in September to make Apple's iWork productivity suite free on iOS for new device buyers and the company's second attempt at a cloud-based iWork, called iWork for iCloud.
But if Apple followed Microsoft, and "Surface-ized" the iPad, wouldn't it be dinged as a copy cat, trailing its rival? Perhaps, but Apple wouldn't care. "I don't think that would hold them back," Bajarin said. "The real issue for Apple is, 'Can we reinvent the product around the way we would like to use it?'"
Apple has a knack for that. Its iPod wasn't the first MP3 player: Audible.com's MobilePlayer beat Apple to the punch by four years. Nor was the iPhone the first smartphone or the iPad the first tablet. Microsoft's then-CEO Bill Gates, for example, held his company's Tablet PC aloft in 2001, and even then, was far from first.
Apple is patient, said Bajarin, bides its time, and moves only when it believes the time is right and ripe.
It's hard to argue that now is that time. Customers haven't beaten a path to the Surface Pro or OEM alternatives. And Bajarin thought it unlikely that hybrids would capture a majority share. "Ultimately, we don't think it will have more than 20% of the market," said Bajarin of 2-in-1 devices. But 20% of the PC market or the tablet market -- or both -- would be huge. On Monday, Gartner's latest forecast put PC shipments next year at 321 million, tablets at 263 million.
And it's tough to separate the 2-in-1 concept from Microsoft and its Windows 8 strategy of mashing together opposite UIs, one for touch, another for mouse and keyboard. Is the concept itself the barrier to consumer and business acceptance? Or is it Microsoft's execution of that concept?
Bajarin didn't have an answer because, so far, there isn't one. Until someone other than Microsoft and its OEMs tackle the problem -- and Google's Chrome OS, while perhaps a comparative, really isn't because of its anemic app inventory -- no one will know.
But if Apple did, Bajarin was confident the company would do better than its rival. He based that contention in part of the iPhone 5S and 5C launch last month, when Apple ceded the stage to executives from Epic Games, who boasted that they'd turned their Infinity Blade III game into 64-bit to support the new A7 SoC in just two hours.
"I asked an Apple executive how they were able to do this so quickly," Bajarin wrote in a piece on his firm's Techopinions.com website (subscription required for some content, including Bajarin's commentary on 2-in-1s). "He said that the game itself was created for the Mac and its 64-bit architecture, but with their software developer tools, all they had to do was modify their system calls for iOS. And since iOS is now 64-bit compatible, it was quite easy for them to make a Mac app work on a 64 bit iOS iPhone."
If that's accurate, Bajarin said, it will put an end to the talk of OS X and iOS merging, a process some view as a prerequisite to an iPad-keyboard combination. "I don't believe they'll blend the two. Instead, they might approach it through software compatibility at the app layer, not the OS layer. If it's relatively easy to take a Mac app to iOS, then you give developers yet another toolkit and a new palette of hardware to work with," said Bajarin.
An Apple move towards 2-in-1s might be a validation of Microsoft's vision of the personal computing future -- it's famously contended that the world's not dumping PCs, but that the form of PCs is simply morphing -- but it would also be a threat to the Redmond, Wash. company's device strategy and a threat to its decades-long partner, Intel.
"I can see this as a threat to laptops as stand-alone devices," said Bajarin. "If Apple is able to define the iPad with a keyboard as a notebook, it could be very disruptive to both Microsoft and Intel."
It would be disruptive to the former because the bulk of PC sales are the still-traditional clamshell-style notebooks, and PCs will comprise about 85% of the devices shipped next year with Windows, Gartner Research said Monday. And it would be disruptive to Intel because while Apple relies on the chip maker for the processors in its Macs, it uses its own designs, based on the ARM architecture and the ARM instruction set, within the iPad.
By Gartner's reckoning, shipments of traditional PCs will decline 11% this year and fall an additional 7% in 2014. Only the inclusion of what the researcher called "ultramobile," a category incorporating 2-in-1s, will save the PC from those steep declines: Gartner has forecast that about 18.5 million ultramobile devices will ship this year, then more than double to 39.9 million in 2014.
How Apple handles 2-in-1s would be pure speculation, said Bajarin, but a drastically revamped Smart Cover -- Apple's name for its iPad cover-slash-prop -- that boasts a physical keyboard would be a start.
On Saturday, a former member of Apple's developer relations team claimed that associates still in the company told him that a full-sized iPad case that mimicked Microsoft's Touch Cover had been prototyped. Prototypes are a dime a dozen, and do not indicate intent, only curiosity. But Bajarin thought Apple could run with the idea.
"Apple could develop a whole host of new types of laptop/tablet combos that could be tied to their rich ecosystem that is already pretty much cross-platform, and deliver some rather innovative and powerful mobile computing devices in the future," Bajarin said on his website.
But again and again, he returned to the one stumbling block in the strategy laid out by those who have called on Apple to leap into 2-in-1s: Apple's motivation. As a long-time student of the company, Bajarin kept reiterating his premise, that historically Apple only climbs into the ring when it felt the time was right, no matter what others, including himself, argued.
"They've only jumped in when they thought companies doing this weren't doing it proper," Bajarin said.
And whether Apple thinks that is impossible to know until it shows proof in public. Boasts by pundits aside, no one's a mind reader. Especially when it comes to Apple.
"Does Apple go to school on this, or do they reinvent around existing form factors?" Bajarin asked. "I don't know."
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is email@example.com.