Apple’s iPad Sales Strength Grows as Rivals Lack Success Formula

It is old news that Apple (NASDAQ: AAPL) sells more iPads by a huge margin than any rival can sell other tablet PCs. Apple is so successful that it is almost unfair. New research shows that Apple will maintain its advantage for several years, which means companies that want into the tablet PC sector may be unable to make money for the better part of the next decade. Some will never make money at all. Any firm that wants a successful tablet business will have to be in it for the long haul. And it will be an expensive one.

Research firm Gartner reports that “Apple’s iPad is projected to account for 73.4 percent of worldwide media tablet sales in 2011.” Its only competition will be Google’s (NASDAQ: GOOG) Android-based products, which will  have a tiny share of the market. No other operating systems will have even 5% of sales this year.

The desire to be in the tablet market is understandable. Gartner forecasts 316 million tablets will be sold in 2015. But Apple’s success will extend for years. “We expect Apple to maintain a market share lead throughout our forecast period by commanding more than 50 percent of the market until 2014,” Gartner reported. “This is because Apple delivers a superior and unified user experience across its hardware, software and services. Unless competitors can respond with a similar approach, challenges to Apple’s position will be minimal,” the research firm adds.

The forecasts, if they are close to correct, mean that companies such as Samsung, Dell (NASDAQ: DELL) and Research In Motion (NASDAQ: RIMM) will lose hundreds of millions of dollars as they try to build machines and software that will take an even modest piece of Apple’s sales. Software operating systems companies like Microsoft (NASDAQ: MSFT) face a similarly steep climb. Windows has almost no visible presence on tablet PCs. It will have to accomplish what it wants to do in the smartphone market. It means buying market share at a terrible cost from an entrenched leader.

Apple’s competitors have two choices. One has already been taken by Hewlett-Packard (NYSE: HPQ), which dropped out of the tablet industry, unwilling to make an investment that it believed could not pay off. HP may have been wise. Just 5% or 10% of a market gained over several years may never offer a return on investment.

The business decision to pursue tablet sales comes down to whether a tech company can afford to challenge Apple when the odds of success are slim.

Douglas A. McIntyre