Jan. 27, 2011 at 3:55 PM ET
The great majority of people who buy iPads either get Wi-Fi-only versions or 3G models that they never activate. If the people who bought the first 15 million iPads are a good indicator of the premium Android tablet market, then 10-inch Wi-Fi-only models are on their way, and you'd be wrong to think that your only option is an overpriced "subsidized" tablet sold by a wireless carrier.
There's another reason: Motorola's Sanjay Jha described this potentially massive audience in a chat with analysts yesterday, and alluded that his company would be a part of that market.
Meanwhile, Samsung announced earlier this month that its Galaxy Tab would finally come in a Wi-Fi only version, something people had anticipated — without satisfaction — throughout last holiday season.
So let's look again at those Apple numbers, because they prove that most tablet buyers want a Wi-Fi-only version.
In the last quarter of 2010, Apple sold 7.33 million iPads. According to Ross Rubin at NPD, more than half were likely sold in the U.S. Let's say it's 4 million, for the sake of easy math. In that same quarter, AT&T announced that it had activated 442,000 3G iPads. By our back-of-envelope calculations, that means only a little more than 10 percent of the iPads sold in the U.S. over the holidays got cellular service in that period.
Rubin and another wireless-industry analyst, Chetan Sharma, have suggested that the Wi-Fi-only iPad sales are greater than 60 percent, and that Wi-Fi-only usage may be upwards of 75 percent. Those unactivated iPads did have built-in 3G capability, but that only drives the point home: Almost everyone who wants to spend $500 for a tablet is looking for one with a flat price and no wireless plan.
So why are the first major Android tablets headed for the wireless carriers? In a word: profit.
Hopefully by now you know that when you buy a phone with a two-year contract, some of the price of that phone is hidden in your monthly service fee. As it happens, companies don't just recoup their money, they can make a higher profit margin selling products this way. And that's not including whatever they make by selling the "exclusive" rights to a product to a single carrier. Motorola sells pretty much all of its consumer products (i.e. phones) through carriers, so it's already their business norm.
Yet when Motorola's Jha talked to analysts yesterday, he said that the tablet business will be "lower gross margin" because "a meaningful portion of it will go through retail, as opposed to being sold by phone carriers," reported the Associated Press. So not only was he explaining that many tablets would be sold through retail — primarily as Wi-Fi devices — but he is suggesting that his company would experience this lower margin, because they'd be in the Wi-Fi-only tablet business.
The cellular-equipped tablet business has merit, but only with a particular audience: Corporate travelers. These are people who are always on the move, have some kind of expense account to cover the ongoing costs, and simply lose money when they can't connect wherever they are. But if you are one of these people, you know this already. If you are not, why waste your own hard-earned money on an unnecessary monthly bill?
When I checked with a Motorola spokesperson about this, she was clear that they had only announced the Xoom tablet, to be sold through Verizon. However, there was no explicit denial that Wi-Fi tablets were on the way.
So, if 75 percent of the tablet-buying populace — quite possibly as many as 90 percent of them, in fact — want a 10-inch Wi-Fi-only Android tablet that can go up against iPad, how soon till we get them? I'm gonna say July.
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