Recent developments in the tablet space raise the question of whether the potential growth has been overhyped, or are new entrants simply not compelling enough to consumers?

HP?s surprising decision to exit the mobile device business last week put an end to its TouchPad tablet, which the company said has not been meeting sales expectations. Other recent hits to the tablet space include the demise of the Streak 5, Dell?s smallest Android tablet, and Sprint?s announcement that it will not carry a 4G version of the RIM PlayBook.

?Apple clearly has the bit in its teeth with the tablet market,? Rhoda Alexander, director for monitor research at IHS iSuppli, El Segundo, CA. ?Everybody who is coming up against them is stumbling ? we haven?t seen anybody catch fire the way that the iPad has.

?I think we are going to see more of these kinds of moves, with people entering the tablet space and trying to see if they can be successful,? she said.

?Some may decide to reenter with a stronger offering or do what HP has done and say we want to focus on other areas where we think we can be more successful.?

Pricing strategies
Global tablet shipments jumped 331 percent in the second quarter on the strength of the iPad and the introduction of new tablets on operating systems, according to recent research from Strategy Analytics. 

However, there are indications that sales for many of the newcomers have not been strong.

Best Buy reportedly is sending back many HP TouchPads that are sitting on the shelves and the recent move by Dell and Sprint would suggest these companies are not seeing enough demand from consumers to warrant offering a wide selection of tablets.

The recent new round of economic uncertainty and the looming possibility of another recession could be an additional drag on tablet sales.

?If there is a double-dip economic recession in the US, then tablet sales will inevitably slow down as consumers and companies rein in their spending,? said Neil Mawston, England-based director of global wireless practice at Strategy Analytics. ?Tablet vendors would need to react to a recession by dropping prices or upgrading their R&D to provide more compelling products.?

The problem may not be that consumers are not interested in tablets but that newcomers to the space have not found the right formula to gain consumer interest.

There is a lot of room for companies to enter the tablet space and do with the right proposition, per Jeff Orr, group research director for mobile devices at ABI Research, Oyster Bay, NY.

?It has to do with meeting expectations,? Mr. Orr said. ?If they think they are going to come in and compete with iPad, they will face a challenge.

?What they need to do is offer a value proposition that is different from the iPad and stick to it.?

For example, there is an opportunity to create tablets that come as close as possible to the user experience that consumers are used to on smartphones and PCs, per Mr. Orr.

?This could suggest that Windows Phone 7 could be an opportunity for business-focused tablets,? Mr. Orr said.

IPad rules
The main reason others are struggling in the tablet space is the popularity of the iPad.

Apple?s iOS had a 61 percent share of global tablet shipments in the second quarter, according to Strategy Analytics. This number is down from 94 percent a year ago, while Android captured a 30 percent share.

A survey by Milwaukee, WI-based wealth management firm found that 50 percent of respondents already owned a tablet or were interested in buying one soon, with 95 percent naming the iPad as their tablet of choice.  

?The global and US tablet market is broadly growing in-line with our expectations from the start of the year, which is that Apple dominates and a long tail of me-too competitors are struggling to grow much beyond single-digit market shares due to a lack of differentiation,? Strategy Analytics? Mr. Mawston said.

?Apple defined the finger-driven tablet category last year, and its huge brand equity is helping it to stay ahead of rivals this year,? he said.

One of the problems tablet manufacturers other than Apple have had is finding the right pricing strategy.

While Apple is getting up to $800 at retail for the iPad, other manufacturers may need to go lower.

?For Apple, a sweet spot has already been reached, which is currently around $400 to $800 retail,? Mr. Mawston said. ?For much of the rest of the tablet industry, our research indicates their pricing sweet spots will be lower, around $200 to $500 retail, because of relatively weaker demand.?

A young market
There is also uncertainty in the tablet space because it is still so young.

Since the tablet market is still developing, there could be other players waiting to jump in. For example, reports suggest Amazon is readying a tablet. 

?The wild card is Amazon,? Mr. Mawston said. ?If Amazon can deliver a compelling tablet experience during the next few months, then its established distribution channels and high brand awareness could start to chip away at Apple and other players.?

For now, many are looking to fourth quarter and the holiday shopping season to see how tablets will fare.

While tablets could be a popular electronics gifts this year, at the moment it seems likely that the iPad will continue to dominate sales.

?There is an opportunity for tablets this holiday season if they can become a more affordable alternative to PCs,? ABI Research?s Mr. Orr said. ?If consumers are considering updating their computer but are reluctant to spend that kind of money this holiday season, perhaps a media tablet becomes more attractive and they keep the PC for another year.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York