) CEO Thorsten Heins is making headlines today after sharing his
views on the future of tablets. "In five years I don't think
there'll be a reason to have a tablet anymore," Heins told
. "Maybe a big screen in your workspace, but not a tablet as
such. Tablets themselves are not a good business model."
Heins' comments may stem from his own experience in attempting
to sell tablets.
PlayBook, BlackBerry's first and only tablet, was arguably the
company's biggest flop. It sold so poorly that the firm lost
nearly $500 million
due to the "excessive" inventory created by unsold units. Each
tablet cost as much as $270 produce, but by the time BlackBerry
had finished reducing the price, the PlayBook was being sold for
All told, this tablet has drained
from BlackBerry's piggybank.
When it was first released, the PlayBook sold for $499 -- the
same price as Hewlett-Packard's (NYSE:
) ill-fated TouchPad. Consumers did not care about
Hewlett-Packard's tablet until its price
dropped to $99
Those scenarios are not the norm, however. While many tablets
have failed at retail, Apple (NASDAQ:
) has found the tablet market to be quite profitable.
During the fiscal 2013 second quarter, Apple sold
19.5 million tablets
. More than half (12.5 million) are believed to be
iPad Mini units
, which sell for a minimum of $329. The remaining seven million
iPads were full-size units, which start at $499.
At those prices, Apple earned at least $4.1 billion in revenue
from the iPad Mini ($329 x 12,500,000 units = $4,112,500,000) and
$3.49 billion from the full-size iPad ($499 x 7,000,000 =
Those earnings are just from one quarter.
In January Apple announced that it had sold
more than 120 million iPads
worldwide. With the second quarter results added in, Apple has
sold somewhere around 139 million tablets.
How is that a bad business model?
Apple is not the only firm enjoying the benefits of selling
tablets. Amazon (NASDAQ:
), Barnes & Noble (NYSE:
) and Samsung are also benefiting from this growing market.
Under Heins' theory, all of those corporations should pack up
and abandon the tablet industry to avoid the impending doom.
Even if Heins is right, that would be a foolish mistake. There
are still billions of dollars to be made selling tablets. Why
back out now?
Heins could have been more specific -- he could have said that
the tablet market was not right for BlackBerry, as evidenced by
the PlayBook. He could have said that tablets would merge into
other devices (such as phablets or convertible laptops). Heins
could have also said that he felt the tablet market has peaked
and that sales would begin to decline over the next five
Instead, BlackBerry's leader decided to take the unusual path
of dismissing the existence and future potential of a product
category that has already proven to be vastly more successful
than anything his own company has released over the last two
Louis Bedigian is the Senior Tech Analyst and Features Writer
of Benzinga. You can reach him at 248-636-1322 or
louis(at)benzingapro(dot)com. Follow him
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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