The Next Big Thing, 20 Years Later

If there was a land of misfit gadgets, the tablet computer would be one of its oldest residents. The tech industry, though, refuses to give up on these slate-like portable PCs. Tablets from Hewlett-Packard (HPQ), Dell (DELL), and others were some of the stars at this month's Consumer Electronics Show in Las Vegas, while the buzz around Apple's long-awaited entry into the market, due out this spring, is already deafening. "The industry understands better how people can use tablets," says Roger Kay, president of Endpoint Technologies Associates.

Yet PC makers have been trying to sell consumers on the utility of tablets for decades—with little success. In 2001, Microsoft (MSFT) Chairman Bill Gates predicted that tablets would be the most popular form of PC sold in the U.S. within five years; in 2009, they made up less than 1% of the market, according to estimates from research firm IDC.

The first generation was doomed by a combination of big price tags, short battery life, and clunky interfaces. Tablets' capabilities have since evolved, as have the tastes of consumers. Portability is paramount, and the latest crop are lighter, boast longer battery life, and better screen technology. Software is more sophisticated, too, and Web connections have improved. "The timing is right for this," says Philip McKinney, vice-president and chief technology officer of HP's Personal Systems Group. "We wouldn't go into a market that we felt wasn't going to be widely adopted."

Widely adopted remains to be seen. Widely served, however, is a certainty. In 2009, about 15 PC makers released tablets. This year, that number could top 30. Despite the wave of products, most analysts believe the success of the entire category hinges on Apple (AAPL). Sanford Bernstein analyst Toni Sacconaghi estimates the Apple model alone could sell 3 million units in its first year—triple the total tablet sales worldwide in 2009.

That's because of Apple's knack for packaging elegant hardware with software and applications: iTunes drove sales of the iPod, while the App Store is fueling those of the iPhone. Now Apple is trying to convince studios and publishers to format movies, books, and magazines for its latest device.

Getting phone companies to offer new and affordable Internet service plans to support a data-guzzling tablet could prove even more challenging. Currently, Wi-Fi service is too spotty outside the home to make a tablet experience rich, and many consumers are leery of spending $60 a month for a mobile broadband plan. "Connectivity remains a big problem," says IDC analyst David Daoud. "Apple has done pretty fantastic things and maybe they can figure it out."

    Before it's here, it's on the Bloomberg Terminal.