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iPad's multifunction appeal and sub-$500 price point a formula for disruptive technology

T minus a little over a month and a half until retail liftoff of the Apple iPad and, similar to the launch of the iPhone 3 years ago, the device is not without its share of criticism -- be it the lack of support for multitasking or the missing front facing camera (or any camera, for that matter). However, it's unlikely that anything short of a sub-$1,000 multitouch cancer-curing device could have lived up to expectations, for the hype coming into the keynote was of epic proportions.

Expectations aside, however, the iPad's price point and feature set put Apple in a position to disrupt the low-end notebook computer market, while also providing it a foot in the door in the eBook market as well as traditional print media.

Though multipurpose in functionality, the iPad will likely find its largest appeal in the low-end notebook computing space, primarily the sub-11 inch variants dubbed "netbooks." As implied in the nomenclature, netbooks place less of a focus on raw computing horsepower and instead aim toward providing an extremely portable and affordable means to surf the net. While the ultra-compact form factor of netbooks makes them extremely portable, it brings compromises -- namely cramped keyboards that, unless you're an Oompa Loompa or haven't yet reached middle school, are difficult to type on. While the iPad lacks a built-in physical keyboard (it's an optional accessory), its multitouch-enabled 9.7 inch LED display provides a clearly differentiated and, on initial impression, a superior web browsing experience.

While still priced at a premium over most netbooks, the iPad's $499 opening price point places it in the pricing pantheon of affordable computing, as crossing this sub-$500 psychological purchasing barrier increases its attractiveness in competing for the mindshare of consumers considering a netbook.

With the iPad, Apple is also looking to make inroads into the eBook reader market, where it will be joining Amazon and Sony, two of that market's bigger players. Unlike the iPad, Amazon's Kindle and the Sony Reader offer a "book-like" experience through e-ink technology -- in contrast to the LED-backlit screen of the iPad. Despite the virtues of e-ink and carrying hundreds of books with you, eBook readers haven't yet hit mainstream status, in spite of Amazon CEO Jeff Bezos' claim of selling "millions" of Kindles.

While the reading experience on the iPad -- most notably eye strain and battery life -- has yet to be thoroughly fleshed out, the device's other features will help mask whatever e-reading deficiencies it has against existing e-ink based offerings. Thus, whatever inroads the iPad makes within the eBook reader market will likely be paved by its other virtues.

Although the potential addressable market for a dedicated eBook reader is likely much smaller than those considering a notebook computer, the iPad's $499 opening price point also produces a purchasing conundrum for the former. At $499, the device is priced within reach of the Kindle DX's $489 price tag, while also providing the ancillary benefits of a multitouch portable computing platform.

Such an approach may be the best way to grow the eBook category mainstream, and is in line with Apple thinking. At Apple's September 2009 special event, Steve Jobs noted that while "there will always be dedicated devices, and [that] they may have a few advantages in doing just one thing...general-purpose devices will win the day because...people just probably aren't willing to pay for a dedicated device." And while the iPad lacks an e-ink based screen, its color LED-backlit multitouch display could provide consumers with new ways to consume traditional media (newspapers, magazines, etc.) and traditional media companies new avenues for revenues.

But at the end of the day, the Apple iPad is a computer and, as such, could possibly serve as a substitute for a MacBook or MacBook Pro purchase for some consumers. For many, computing could boil down to surfing the web (i.e., "checking my Facebook"), email, and basic productivity apps, such as word processing and spreadsheets.

However, the slightest footstep outside of this sandbox demands more, be it a video editor demanding more processing power to render and store h.264 videos or a college student who needs a torrent or P2P client and codec support to play DivX videos. Add to this formula the iPad's lack of support for multitasking as well as its smaller screen display, and the potential for cannibalization is likely marginal.

Yes, many may have found the iPad announcement underwhelming. But expectations aside, the device is a misfit with its cross category functional appeal. And it's these misfit ways that, coupled with a competitive opening price point, arm it with great potential to disrupt multiple categories and serve as another avenue to drive growth for Apple.

*Median price of Netbook based on top 15 best selling models at Bestbuy.com.

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