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5/21/2009
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Apple Could Find Healthy Market For $700 Touch-Screen Tablet

Analysts say consumers are willing to pay more for a device that's easier to use and more functional than today's netbooks.

If Apple is building a touch-screen tablet as imagined by a recent analyst report, then the computer maker could find a strong market among consumers willing to pay more for a device that's easier to use and more functional than today's netbooks.

Piper Jaffray analyst Gene Munster believes Apple is working on a device that would have a 7- to 10-inch touch screen and sell for $500 to $700, Apple Insider reported Thursday. The gadget would fill the gap between Apple's $400 iPod Touch and $1,000 MacBook.

Evidence pointing to such a device is coming from Piper Jaffray component contacts in Asia, as well as from recent Apple patents related to multitouch technology, comments to financial analysts in April by chief operating officer Tim Cook, Apple's acquisition of chip designer P.A. Semi, and recent chip-related hires, Munster said. "It is increasingly clear that Apple is investing more in its mobile computing franchise."

If Apple is working on such a device, then it could find a solid market. Despite their cramped keyboards and frustratingly tiny touch pads, netbooks have become the hottest-selling segment of the computer market, accounting for nearly a fifth of all laptops shipped in the first quarter of this year, according to DisplaySearch. While shipments of more traditional laptops and desktops have fallen in the economic recession, netbooks have experienced double-digit growth.

Part of the appeal, particularly for cash-strapped consumers, has been price. Netbooks typically sell for as little as $300, with most priced at less than $500. But price is only part of the story behind the popularity. The skyrocketing growth indicates that many people are buying because of the convenience of having an Internet-enabled computer that can fit into a pocketbook.

People who aren't just looking for a cheap laptop, and are willing to pay more for innovation, are a prime target for a design-focused company like Apple.

"People who aren't having money problems may want to pay more for something that they perceive as better constructed," Ezra Gottheil, an analyst for Technology Business Research, told InformationWeek. "This is particularly true for people buying netbooks for a second or third computer."

Gottheil, who also believes Apple is working on a touch-screen tablet, said the one item Apple would need is support for a full-size keyboard. The keyboard would not have to be attached to the device, but could be used through a Bluetooth wireless connection.

Without a keyboard, Apple would only have a niche device that would appeal to a much smaller market. "There's just too many situations where a keyboard is necessary," Gottheil said.

Munster believes Apple will introduce a tablet in the first half of next year. Gottheil said it could come even sooner.

Given the current projections for netbook sales, getting a device out sooner than later would seem advantageous. As the economy improves, growth in netbook shipments is expected to slow year over year from more than 68% this year to less than 40% next year, eventually falling to slightly more than 13% by 2013, acccording to iSuppli.

Once price become less of a factor, then the market for a more innovative, albeit pricier, device is likely to grow.


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