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Google Wants to Beat the iPad 3

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The Android maker is getting ready for a full-scale assault on the tablet industry's leading manufacturer, and by May 2012, Google (NASDAQ: GOOG) will have its own tablet on store shelves.

That's the word from company exec Eric Schmidt, who said that the new device will be of the highest quality. Granted, we have heard this same claim from Motorola (NYSE: MMI), a company that Google is in the process of acquiring. We've heard this claim from Research in Motion (NASDAQ: RIMM), a company that appeared to have an iPad killer in its hands until the PlayBook, the atrociously forgettable BlackBerry-inspired tablet, was released. We heard this claim from HTC and Samsung, but neither company delivered a must-have device. Sony (NYSE: SNE) had some potential for innovation with its dual-screen concept, but that failed as well. Hewlett-Packard's (NYSE: HPQ) tablet bombed so badly that the company had to knock $400 off the retail price just to get our attention.

It wasn't until Amazon (NASDAQ: AMZN) released the first decent-quality $200 tablet that consumers began to envision a world in which Apple (NASDAQ: AAPL) wasn't the only player in the tablet market. But in terms of quality, some critics are not happy with the Kindle Fire, leaving Apple as the only acclaimed tablet maker.

(Curious about Apple's first TV? Read five reasons why its release will be delayed here.)

In Amazon's defense, the first iPad was largely referred to by critics as a giant iPod Touch. Next fall, the Kindle Fire 2 may very well eliminate every complaint of the original Kindle Fire. But for now, Apple is clearly the king.

This leaves Google in one of the most difficult positions the company will ever face. While the company overcame the search engine wars by building a better product than Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT) and other competitors, Google faces a much tougher battle in the realm of electronic devices. Android may be a cool iOS alternative (to some users, at least), but the current crop of Honeycomb tablets has left a lot to be desired.

When Google announced its plans to acquire Motorola Mobility for $40 per share, most commentators expected the company to abandon Motorola's manufacturing division (either through a sell-off or a spin-off) or shift production to the areas that matter most to Google, such as cable boxes. Google would love to be in our TVs, but not even a Google TV refresh could help the company accomplish this goal. With Motorola, Google could presumably add its technology to every cable box sold. That is, assuming Comcast (NASDAQ: CMCSA), Time Warner (NYSE: TWC), and other cable providers did not object to the Google invasion.

Some analysts and bloggers have warned that Google is not prepared for the world of manufacturing, which is both costly and challenging. But that's precisely why Google teamed up with other manufacturers to produce its line of Chromebook laptops - to leverage the power of experts in the field. By acquiring Motorola, Google could essentially do the same thing but keep the core manufacturing elements in-house with an experienced team that has been in the business for several years.

Even without Motorola, Google is apparently ready to compete more seriously with Apple. But who will be in charge of manufacturing Google's first tablet? Gizmodo assumes that it will be the tablet version of the Nexus, which is manufactured by Samsung. Is that what consumers really want – a Samsung tablet? Probably not. But if the price is right, consumers might get excited anyway.

ACTION ITEMS:

Bullish:

Traders who believe that the iPad 3 could receive significant competition from Google should:

  • Keep a close eye on Amazon, which could prove to be Google's biggest threat as the number-two player in the tablet market.
  • Remember that when the iPad 3 launches, it will be very difficult for consumers to care about or pay attention to any other device, regardless of its quality, manufacturer or OS. Thus, Apple will be the big 2012 winner regardless of the competition.

Bearish:

Those who think that Google is headed for trouble might want to:

  • Steer clear of most tablet manufacturers altogether and go right for component manufacturers, such as Texas Instruments (NYSE: TXN).

(For immediate updates on Google, Apple, Texas Instruments, and more, take advantage of the lightning-fast speed of Benzinga Pro.)

Follow me @LouisBedigian

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