Lenovo CEO Says Apple Will Not Be Able to Sustain the iPad’s Current Dominance

[epb]

I see the strategy of targeting business customers as flawed, since business is a small part of the tablet market. That's like seeing you'll beat McDonalds by selling only fish sandwiches.

Apple products are a solid but marginal (currently 6%) part of the Personal Computer market because they've never been strong in general business areas and the bulk of PC workstations and laptops are bought by businesses.

In the consumer market it's the reverse, Apple dominating with 74% of the table market. Those aren't Fortune 500 companies lining up outside Apple stores for the latest iPad - just consumers. In fact, the iPad would be an IT Dept. nightmare when you consider that most large companies update their operating systems every few years, while the iPad's iOS changes every few months.

What we'll see in the tablet market is that Apple will continue to dominate (currently 74%) due to consumer sales and a HUGE lead, while the much smaller business segment of the tablet market will split among the other companies, likely by type of business (medical, industrial, financial, etc) as they have different requirements/concerns.

Is it an iPad killer in the consumer marketplace? Of course not. But any corporate or government IT department may well find it to be a much better device when they're purchasing tablets by the gross.

And individual business users may well find many of the same features to be attractive.

 

[jsh1120]

I see the strategy of targeting business customers as flawed, since business is a small part of the tablet market. That's like seeing you'll beat McDonalds by selling only fish sandwiches.

Sorry, but what is flawed, I think, is your analogy. In the first place, the widespread assumption that success is measured solely in terms of "winning" some non-existent "game" is problematic. Business is not a game in which teams compete until the game is "over" and a "winner" is declared. To use your terminology, the fact that McDonald's sells more hamburgers than Burger King doesn't mean the latter "loses." Likewise, KFC sells more chicken sandwiches than McDonald's. Does that mean McDonald's "loses" the chicken sandwich "market"? (Whatever that is.)

Apple has been spectacularly successful in expanding the market segment interested in purchasing tablets by targeting consumers who don't necessarily need (or want) a PC to consume media and play games and for whom an iPod or smartphone is simply too small to provide a satisfying user experience.

That expansion of the market doesn't make the business segment interested in using tablets as supplementary tools smaller; it simply makes that segment a smaller percentage of potential tablet purchasers.

Lenovo is very unlikely to make a serious dent in the mass consumer market that Apple dominates. That doesn't mean it cannot find a highly profitable niche among business users. Just as KFC finds a profitable market among those who like chicken and Long John Silver's does the same among those who like fish.

Declaring "winners" and "losers" in business as if it were a football game is an amusing pastime and one in which consumer focused media specialize. It doesn't, however, have much to do with real business.

 

[thewitt]

The problem is that Lenovo is claiming they will be "right up there with Apple," not that they will carve out a niche market in the commercial tablet space.

I'm sure they will be successful, however I will be very surprised if they ever reach even 20% of the market.

-t

 

[DarkHorizon]

With HP dropping out there is more room for other big companies and unless Apple keeps developing and stays ahead like other market leaders before it competitors will step into its place.

 

[Kaykaykay]

Lenovo could make dirt-cheap tablets and sell to Chinese, for instance. They don't have to compete only in Apple's current market concentrations. It sounds like that's what the guy's saying -- lots of people can't afford iPads, and Lenovo can sell to those people, too. There are 1.3 billion Chinese, and there are plenty of Indians, etc., with limited income as well. Many of them might want an Apple, but will never afford one. That doesn't mean Lenovo or whoever else couldn't outsell Apple.

 

[thewitt]

Only about 2% of China could even afford a "dirt cheap" tablet. Its not the market you think it is.

-t

 

[epb]

Lenovo is very unlikely to make a serious dent in the mass consumer market that Apple dominates.

All that namby-pamby "no one's a loser" blatherskite and you wind up agreeing with me.

I said they wouldn't match Apple because they won't grow in the consumer market. You said they were unlikely to make a serious dent in the mass consumer market. The rest is just a disagreement about terminology, not the analysis.

The Lenovo exec quoted didn't say they'd carve out a tiny niche and dominate 6% of the total market - he said they would be "right up there with Apple" and become "one of the strongest players in this area."

 

[Kaykaykay]

Only about 2% of China could even afford a "dirt cheap" tablet. Its not the market you think it is.

-t

China Overtakes US in PC Sales Earlier Than Expected | PCWorld Business Center

It's just a matter of time before tablet sales take off in China, too. And there's no reason cheap Lenovo (or other brand) tablets would be limited to sales in China.

 

[Kaykaykay]

Only about 2% of China could even afford a "dirt cheap" tablet. Its not the market you think it is.

-t

This happened last year, by the way:

Chinese Mobile Internet Use Overtakes USA

 

[thewitt]

The reason that the mobile infrastructure took off in China is that they did not have a wired infrastructure. The government invested in wireless instead.

-t

 

[thewitt]

Just for reference, I spend several weeks every quarter in China, and have for many years. The picture that's painted to the outside world is very much controlled by the government.

-t

 

[Kaykaykay]

Just for reference, I spend several weeks every quarter in China, and have for many years. The picture that's painted to the outside world is very much controlled by the government.

-t

I'm Chinese and divide time between China and the U.S. I don't need to look at pictures, lol.

 

[jsh1120]

Lenovo is very unlikely to make a serious dent in the mass consumer market that Apple dominates.

All that namby-pamby "no one's a loser" blatherskite and you wind up agreeing with me.

I said they wouldn't match Apple because they won't grow in the consumer market. You said they were unlikely to make a serious dent in the mass consumer market. The rest is just a disagreement about terminology, not the analysis.

The Lenovo exec quoted didn't say they'd carve out a tiny niche and dominate 6% of the total market - he said they would be "right up there with Apple" and become "one of the strongest players in this area."

As noted, those who believe business is a football game are seldom dissuaded that it's somewhat more complex than that.

 

[epb]

As noted, those who believe business is a football game are seldom dissuaded that it's somewhat more complex than that.

I'm perfectly willing to concede that business is more complex to you than many people, myself included. It's all the more impressive that you could see how right I am in my analysis, given your limits.

 

[jsh1120]

As noted, those who believe business is a football game are seldom dissuaded that it's somewhat more complex than that.

I'm perfectly willing to concede that business is more complex to you than many people, myself included. It's all the more impressive that you could see how right I am in my analysis, given your limits.

I'll try one last time. The "analysis" that Apple dominates and will continue to dominate the consumer market for tablets defined as devices virtually identical to the iPad hardly qualifies as "analysis." A nine year old would recognize that fact. Touting it as some sort of insight is not much to brag about.

What such "analysis" ignores is first that niche markets, some quite significant, are likely to grow as tablets with specialized capabilities are introduced. Those devices need not outsell the iPad to be "successful," anymore than KFC must sell more chicken sandwiches than McDonald sells hamburgers to be "successful." Their manufacturers aren't "losers" unless their costs exceed their sales. That's how business works.

Second, the whole notion of what constitutes the "tablet" market is up for grabs. Is the Nook Color a "tablet" or an eReader? If the Kindle 4 includes a web browser, email support, video, and audio, will it be an Amazon "tablet" or a deluxe eReader?

Apple will sell between 40 and 5O million iPads in 2011. That is an extraordinary number. But eReader sales in 2011 will top 30 million. And the profit on a $15 book is considerably greater than Apple will generate on a $1 app. Is Amazon a "loser" if its Kindle sales don't top the iPad?

Finally, as the sales of iPads have skyrocketed, the sales of iPods have gone in the toilet. (Down 20% in Q3 compared to the previous year.) Is Apple a loser because they've cannibalized sales of their own product? Of course not. But only Apple's internal accounting team knows whether, despite the lower price of the iPod, Apple wins or loses in terms of net revenue when a potential iPod buyer opts for an iPad, instead.

(If you don't understand why, imagine that a $400 iPod costs $250 to manufacture and sell while a $700 iPad costs $625. Then ask yourself whether you'd rather sell an iPod or an iPad.)

Ultimately, business success depends on more than gross unit sales. Terms like "winners" and "losers" are appropriate when discussing kids' games (even when they're played by adults.) They're less appropriate when evaluating business success where more than the simplest kind of arithmetic is required.