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Apple's Messy Quarter Disguises a Stunning iPad Performance. Can Android Handle the Next Stage of the Fight?


Apple is still selling tons of iPads, while Google gets a foothold in the low end of the market.


MINYANVILLE ORIGINAL Since I so often mock Apple (AAPL) bears, I'll quickly issue my apology to them on their most glorious day of absolute victory: I'm stupid. You're smart. I was wrong. You were right. You're the best. I'm the worst. You're very good-looking. I'm not attractive.

In all seriousness, yes, Apple did have a bit of a messy quarter.

While most folks are focusing on the shortfall in iPhone sales, my main concern is the company's comments regarding the economy, particularly in Europe.

People are gonna buy Apple products until the end of time, right?

Well, maybe that's not the case.

Let me be clear: I have a huge Apple position -- it's about 20% of my portfolio. For now, I think high expectations for iPhone 5 will keep the stock afloat and possibly even rallying into next quarter. So I'm not selling just yet.

But if one lousy quarter turns into two, It could be time for me to get out and move on with my life. I mean, if Apple can't beat the lousy earnings guidance it issued, there will indeed be something rotten in the state of California.

For now, in the interest of accentuating the positive, I'm going to zero in on one thing: iPad sales.

It's no secret that the iPad has been on fire, destroying all opponents like a vintage Mike Tyson.

In fact, iPad momentum has been so strong that in mid-June, market-research firm IDC significantly raised its iPad forecast while simultaneously taking down its outlook for Google (GOOG) Android tablets. (See: IDC's 1% Tablet Forecast Increase Masks a Huge Decrease in Expectations for Google Android.)

Here's how I broke the numbers down with some 8th-grade math:

When we take the new 2012 Google Android tablet market share forecast of 36.5% and multiply it by the new 107.4 million unit forecast for the market, we get 39.2 million units.

That 39.2 million number is a whopping 16.4% decrease from the 46 million unit forecast from March 13.

Likewise, IDC's forecast for Apple iOS units has gone from 58 million units to 67.1 million units (62.5% X 107.4 million units = 67.1 million units) -- a boost of 15.5%!

Now, numbers from market-research firms, while generally reasonably accurate, aren't the be-all and end-all. It's nice to get official confirmation from companies themselves.

And in this case, yesterday, Apple fully backed up what IDC was saying when it announced that it sold a whopping 17 million iPads in the June quarter, easily beating Wall Street's expectations of 16 million units.

That marked 84% year-over-year unit growth, which should be more than enough to keep Apple's tablet market share on the upswing. This is a safe assumption, given that IDC is forecasting full-year growth of 54% for the broader market. And don't forget: In the March quarter, iPad sales grew by 151%.

Imagine that -- having 60% market share, and growing.

Ironically, the only technology market-share feat I can recall that is more impressive would be Google's everlasting dominance of the search game.

So, I stand by this earlier statement: "There is no tablet market. There is only an iPad market."

However, Google recently released its $199 Nexus 7 tablet, a not-so-stealthy missile aimed square at the dominant forces in the bargain bin -- the Amazon (AMZN) Kindle Fire and the Barnes & Noble (BKS) NOOK Tablet. (See: For Google's Nexus 7, the iPad is the Least Important Target.)

Let's take a look at how it's doing.

As I've written, the Kindle Fire and NOOK Tablet, which are in the No. 2 and No. 4 spots within the Android market, both run heavily-modified versions of Android. in fact, they were designed to push Amazon and Barnes & Noble's respective digital-content stores, and not the Google beast.

It turns out that Google did a bang-up job with the Nexus 7, with reviews indicating that it is the superior budget tablet:

It certainly appears that sales are off to a decent start as Google "seriously underestimated demand" for the $249 16-gigabyte model, as reported by The Guardian. As of the time I'm writing this, the Google Play store shows the 8-gigabyte model in stock, which is frankly a surprise to me. However, the fact that it is in stock might imply that Google is not playing games like intentionally limiting supply to generate buzz over having its tablet sell out.

Additionally, the ad network Chitika said that Nexus 7 usage is skyrocketing, and should approach the levels of other Android tablets in the near future. Just keep in mind that the iPad sees over 30 times as much usage as the most-popular Android tablet, which is the Samsung Galaxy.

Add it up, and it looks like Google's got a solid foothold in the low end of the tablet market.

However, what I wonder is: Who's going to step on whose turf first?

Apple is heavily rumored to release an iPad Mini that would directly compete with the Nexus 7 and other budget Android tablets.

At the same time, Google has to be eyeballing the high end of the market since it can't possibly be making money on such a well-spec'd $199 device.

I have zero doubt that Apple can succeed in the low end should it choose to go there.

But can Google succeed at the high end where Motorola (now owned by Google, incidentally), Research In Motion (RIMM), Samsung (SSNLF), Hewlett-Packard (HPQ), and many others have failed?

My initial guess is no, but stay tuned. If Google builds a following with its own line of optimally-designed tablets, it might eventually start creeping up on the iPad. And when I say eventually, I mean 2013 at the absolute earliest.

Yes, it feels crazy to even question Apple's complete domination in tablets, but you never know...

Twitter: @MichaelComeau

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