Apple, Inc.'s (AAPL) gibe at Google Inc.'s (GOOG) Android OS is that it was not designed for tablets. Google answered that challenge last week with the launch of Honeycomb. Motorola Mobility's (MMI) Xoom, due out later this month, will feature Honeycomb and should make a splash in the tablet market as competition heats up among tablet manufacturers and affiliated operating systems.
Even with the older version, Android has already started to dent iPad's market share due to the success of Samsung's Galaxy Tab, and we expect that Xoom could improve Android's position intensifying the showdown between Android and Apple's iPad OS.
We have a $420 Trefis price estimate for Apple stock, which is 24% higher than the current market price.
OS Wars Are Heating Up
Devices that carry Android's Honeycomb could be a genuine threat to the iPad. Honeycomb is expected to bring features specifically for tablets, which includes support for big screens (7 to 9 inch), a totally revamped user interface, extensive multi-tasking and multiple home screens among other features.
According to Gartner, smartphones using Android OS have already surpassed Apple iPhone in the global smartphone market with Android's market share increasing from a mere 3.5% in Q3 2009 to 25.5% in Q3 2010 while Apple's actually decreased slightly to around 17%.
If Android could generate the same success with tablets, it will further benefit Google's search business as higher Android adoption expands its search business (See Google Market Share in Search to Grow from Android).
We estimate that the iPad constitutes around 7% of our estimate for Apple's stock. Apple sold around 15 million iPads in 2010, and we expect Apple to sell around 35 million by 2013. Using our modifiable chart above, for a 5 million unit change in iPad sales by 2013 translates to around 1% shift in our price estimate.
You can see the complete $420 Trefis Price estimate for Apple.
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