Apple's dilemma: 'Surface-ify' the iPad?

Analysts wrestle with whether Apple will arm a larger iPad Pro with its own keyboard

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Apple will unveil a larger iPad on Wednesday at its annual iPhone event, analysts bet, as a way for the Cupertino, Calif. company to boost tablet sales by targeting creative professionals, mobile office workers and perhaps field forces with more screen real estate.

The question they continue to wrestle with, however, is whether Apple will follow Microsoft into the 2-in-1 market by offering a keyboard of its own design that would make the iPad Pro a reasonable replacement for a notebook.

In other words, will Apple "Surface-ify" the iPad?

"I'm expecting an Apple option. It will be really tough for Apple [to target the notebook replacement market] if there's not an option for a keyboard to come into play," said Patrick Moorhead, principal analyst at Moor Insights & Strategy.

"It's a possibility," said Ezra Gottheil of Technology Business Research, countering with a more cautious prediction.

While a larger iPad has been the butt of speculation almost from the opening days of Apple's tablet business in 2010, talk of a "Pro"-grade device, with a screen in the 12-in. neighborhood, has grown much louder this year. Many, including Moorhead and Gottheil, anticipate that Apple will introduce a new-sized model on Wednesday as it hosts an iPhone roll-out presentation in San Francisco.

An iPad Pro, they said, nicely meshes with already-in-evidence moves Apple has made, including a 2014 partnership with IBM; the professed confidence in growth expressed by its CEO, Tim Cook; and the availability of Microsoft Office, still a standard in business, on iOS for the last 18 months.

"A larger iPad plays into their corporate strategy of interfacing with the back end of business," said Gottheil about Apple's interest in the enterprise as defined by the IBM deal, and more recently, one struck with Cisco.

"There will be two audiences for a larger iPad," opined Moorhead. "First of all, creative professionals, and second of all, mainstream business [workers] who would use an iPad as a primary productivity device."

Moorhead sees the 164 million portable PCs expected to ship in 2015 -- the number IDC forecast just last month -- as an opportunity for Apple, which already competes in that market with its MacBook line of laptops, to increase sales and share by introducing another alternative in an iPad Pro armed with a keyboard.

Third-party accessory makers already offer keyboards for existing iPads, but they suffer from flaws, including separate chargers and charging regimens. And they are not Apple branded, which makes a difference to some customers.

If Apple is to Surface-ify the iPad, it must take control of the keyboard, Moorhead argued. "Apple has to make it be the best, particularly if it's part of a case," he said. "A keyboard needs to pull power from the iPad, it has to be backlit."

"An iPad keyboard must really work well when [the device is] open, it can't fall over or be awkward," added Gottheil as he criticized some of the existing third-party options.

The idea of a keyboard-equipped iPad would not be controversial if Apple's CEO hadn't dissed the concept. In October 2012, shortly after Microsoft introduced its first Surface tablet, chief executive Tim Cook called it "a fairly compromised and confusing product," and in the next breath, compared it to "a car that flies and floats."

A few months earlier, Cook had been even more dismissive of 2-in-1 devices. "Anything can be forced to converge," Cook told Wall Street analysts in April 2012. "You begin to make trade-offs to the point where what you have left at the end of the day doesn't please anyone. You can converge a toaster and a refrigerator, but those things are probably not going to be pleasing to the user."

Walking back the toaster-refrigerator and flying-floating-car comments may take some fancy dancing, but Apple hasn't been averse to eating its words. Long after co-founder and at-the-time CEO Steve Jobs waved off smaller tablets as a joke, Apple introduced the iPad Mini.

Nor has Apple hesitated to enter a market as follower rather than leader, religiously ignoring what ridicule is heaped upon it for by those who see copying, as with Apple Music this summer.

But an Apple-branded keyboard isn't assured, as the analysts pointed out. Evidence of one has been virtually invisible -- few Apple products escape the leak industry that is the company's supply chain -- which points to either no keyboard or one that has yet to start production.

An iPad Pro sans keyboard would still be useful, Gottheil reasoned. "I can see both artistic and data analytics apps where more inches [of screen] would pay off," he said. "And doing quite well in field work, like service manuals, where a lot of data or text on the screen at the same time pays off."

In the end, keyboard or not, Apple hopes to restart iPad growth with a larger screen, the experts said. With sales down in the last six quarters, and in seven of the last nine, the company's wait for an elusive replacement cycle hasn't worked.

"[An iPad Pro] is part of Apple's grand plan for the next five years," asserted Moorhead, who was bullish on the prospects of a larger tablet making inroads into the workplace as, like Microsoft's Surface Pro 3, a substitute for a notebook.

Why? In part because of Microsoft Office. "Office on the iPad is one the best things to happen to Apple," Moorhead contended. "Office 365 has negated even the free productivity tools Apple provides," he held, talking about the free trio of Pages, Numbers and Keynote. Armed with Office, an iPad Pro would be, in Moorhead's words, "enterprise ready" and suitable for more than just the usual tasks tossed to a tablet, like email and light browsing.

Cook, naturally, has been optimistic about the iPad, regularly trumpeting its potential if not its actual sales. In July, during the most recent conference call with Wall Street, he touted iOS 9's productivity enhancements, including side-by-side apps. "The enterprise business is clearly picking up, and more and more companies are either contracting for or writing apps themselves," Cook maintained.

"I see a lot of runway ... I see opportunity left and right," Cook added about the iPad, perhaps with the anticipated Pro in mind.

Apple will kick off the Wednesday event at 10 a.m. PT (1 p.m. ET). A live-stream broadcast will be available from the firm's website on devices running iOS, OS X and Windows 10.


Copyright © 2015 IDG Communications, Inc.

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