On Apple’s last earnings call, CEO Tim Cook responded to a question on Windows 8 convertibles by saying, “You can converge a toaster and a refrigerator, but those aren’t going to be pleasing to the user.” At first glance, this makes total sense, and from the company that brought us iPod, iPhone and iPad, this has wisdom. But as we peel back the onion and dig deeper, I do not believe Apple is correct in their assessment. As I wrote here, I have long-believed that convertibles would be popular in 2013 and I still believe convertibles will be a thriving future market, albeit not as large as notebooks or tablets.
Mashups between two devices are rarely successful, particularly in mature markets like PCs. I have researched, planned and delivered 100′s of products in my career, and very rarely have I seen two purpose-built products combined to create something real good. The problem becomes that by combining two products, the result becomes good for no one. The primary reason this becomes the case is that you have to make tradeoffs to make the combined product. By combining most products, you are sub-optimizing the separate product and what they uniquely deliver to their target markets. Convertibles have that possibility, but if designed appropriately as I outlined previously, this won’t happen.
Cars give us a few examples to work from. As the car industry matures, we see more and more specialization. There are now sedans, coupes, mini-vans, SUVs, mini-sedans, sports cars, trucks, truck-hybrids, etc. Specialization is the sure sign of a mature market as consumer’s tastes have gotten to a point where they know exactly what they want and the industry can profitably support the proliferation of models. Industry support is a very important in the industry must be able to afford all this proliferation. The auto industry supports this through common parts that are shared like chassis, engines, and electronics.
What does this have to do with convertibles? Ask yourself this question: If my SUV could perform like a Cayman Porsche, would I like it? Of course you would; it is called a Porsche Cayenne. The problem is, you could pay up to $100,000 for it. Want your sedan to drive like a Cayman? Just get a Porsche Panamera. The problem, again, is that is around $95,000. The expense isn’t just about the brand. Porsche invested real R&D and provides the expensive technology to make these “convertibles” perform well.
There are similarities and differences between the Porsche Panamera and Windows 8 convertibles:
- Price: Buyers will only need to spend an extra $100-200 more than a tablet to get a convertible. Many will make that choice to have the best of both worlds. The average U.S. car is around $33,000 while the Panamera is around $100,000, three times the average. One argument Apple could have is that if future, full-featured tablets become $299, the added price could be too much to pay for the added convertible functionality.
- Low “Sacrifice Differential”:This is Apple’s strongest point, as in many mashups, combining two products results in something that isn’t good for any usage model. “Fixed” designs will need to be less than 13mm thick and the “flexible” designs (ie Transformer Prime) need to be less than 18mm thick with keyboard. Otherwise, the convertibles will be too thick to serve as a decent tablet at 13mm or thicker than an Ultrabook over 18mm.
- Transformation capabilities: Convertible form factors like the Transformer Prime can convert into a “notebook” with an add-on peripheral, but cars cannot. I wish there were a 30-second add on kit that could turn my Yukon into a 911 Porsche but there isn’t. Related to PC convertibles, if you have ever used the Asus Transformer Prime, you know what I am talking about. It is one of the thinnest tablets, and when paired with its keyboard, is only 19mm thick. One of the great features of the Prime is that the keyboard provides an extra 40-50% battery life boost that actually adds utility. Windows 8 for the first time supports the lean-forward and lean-back usage models. As a tablet, the users uses it with Metro. As a “notebook” clamshell form factor, the users can use Metro and then use Windows 8 Desktop with the trackpad and keyboard. This has never existed before and Apple doesn’t have this capability in iOS or OSX.
I do believe that convertibles ultimately will have space in the market as they serve to eliminate, for some users and usage models, redundancy of having two devices. OEMs must be particularly careful in how thick they make them. The original iPad was around 10mm and that was pushing some of the boundaries, particularly with reading books. The thicker the designs, the less desriable they become as they will not make a very good tablet. Flexible designs like today’s Asus Transformer Prime, when connected with Windows 8, could be a lethal market combination as it combines a thin tablet and a keyboard when you want it. Gauging by how much shelf-space is devoted to iPad keyboards, I must conclude that consumers are snatching these up in high volume.
I believe Apple is wrong about convertibles, but on the positive side, Apple’s warning gave the entire industry pause for thought. Interestingly, it provided the opposite effect of what I believe Apple intended, which was to freeze the market. Instead, it indicated that Apple was not going to do it, which motivated more OEMs to build, given they wouldn’t have to worry about Apple. While the volumes for convertibles won’t be as large as tablets or notebooks, I do believe they have a place in the market in the mid-term.