Rise of the Tablet PC and the need for Extremely Modular Tablets

Pepperwood Partners© All Rights Reserved February 2013

Rise of the Tablet PC and the need for

Extremely Modular Tablets

by Stephen Carpenter

and Patrick Seaman

March 2013

STRATEGIC WHITE PAPERSTRATEGIC

WHITE PAPER

TAKEAWAYS

• Reduced Technology Obsolescence

• Lower Cost

• Faster To Market

• Customized to End Users Needs

• Maximizes Application Software Features

Executive Overview

Pepperwood Partners© All Rights Reserved March 2013

Topics in this White Paper

Introduction

3

Death of the PC

4

Rise of the Tablet Market

5

Consumer Market

9

Ruggedized Market

10

Rugged & Commercial

11

Time to Market

14

Modular: The Tablet Evolved

17

Example Modules & Options

19

Prospective Markets

20

Airline Use Case: Odem™ Core

21

Flight Crew

22

Flight Attendants

23

In-Flight Entertainment

24

Ticket Counter Check-In

25

Gate Agents

26

Private Club

27

Maintenance

28

Ground Support

29

Summary & Conclusions

30

References

32

About the Authors

33

About Pepperwood Partners

35


This white paper discusses the fast growing Tablet PC market and presents the case for a relatively unexplored new market segment – that for an extremely modular Tablet PC design that can be quickly augmented / upgraded / updated with specialized features such as sensors, special electronics, additional processors, GPUs, memory, communications devices, etc.

Included are both general industry background and analysis, as well as speculative and forward looking statements regarding market prospects for the odem™ Extremely Modular Tablet PC from Entegra Technologies.

Introduction

odem Core


Death of the PC

The much heralded “Death of the PC” has been proclaimed by many analysts. IDC and Gartner report that PC shipments fell in Q3 2012 more than 8% from a year earlier,1 and 4.9% in Q4.2 On the other hand, the industry moved 350 million units in 2012.3

Many blame tablets, mobile and other factors. Other factors include the success of the PC platform itself – that even 5-7 year-old PC’s are often “good enough” for casual consumers who mostly browse the internet, do social media like Facebook or Pinterest and watch default-resolution YouTube videos.

Gordon Moore, Intel co-founder postulated that the number of transistors on integrated circuits doubles about every two years. This is often generalized as “computing power” doubles roughly every 18-24 months.Old processors are still OK for everyday use



While growth rate of traditional PC sales have flatlined, Tablet sales are rising fast.

The rapid growth of the consumer-grade tablet market is led by Apple, with a bevy of competitors running versions of Microsoft Windows, Google Chrome, Linux, Android and other Operating systems.



Comparing tablet sales to Notebooks, Business Insider projects4 a 64% growth for tablets -vs- a 5% decline for notebooks.

NOTE: Growth in tablets has also impacted sales of printers and print media. Morgan Stanley reports that 42% of tablet owners plan to cancel subscriptions to print newspapers.5 Figure 1: Global Tablet, Notebook & PC sales Forecast (IDC, Morgan Stanley) 6



Figure 2: Market share: Notebooks -vs- Tablets (NPD Displaysearch) 7



Figure 3: Tablet Sales Forecast: 2010-2015 (Forrester Research) 8

Forrester Research projects nearly 40 million tablet sales in the US in 2013, growing to 44 million by 2015.


Consumer Market

Price range: $400 - $900+

New models every 6 - 9 months

Designed for consumers with some crossover into commercial & military applications

Security risk using consumer grade communications protocols

Fragile – requires protective armored cases

Manufactured with specific features --unable to repurpose to support business or technology changes

Mostly non-upgradable

iOS, Android, Windows, Linux

Weight 1.4 – 1.6 lbs


Ruggedized Market

Price range: $2000 - $4000+

New models every 12-18 months after release of underlying technology

Ruggedized – MIL STD 810G; IP65 & IP67

High development costs to configure to specific features

Expensive to modify

Android & Windows Operating Systems

Mostly non-upgradable core

Weight 3.0 – 8.0 lbs


Rugged & Commercial

The “Rugged” or “Ruggedized” market segment grew by 30.1% over the year-ago-quarter, experiencing double-digit growth across all regions.9

Meanwhile, in 2012 there was significant consolidation in the more general category of “rugged mobile” with Motorola Solution’s acquisition of PSION10 and Honeywell’s acquisition of Intermec.11


Rugged & Commercial

The ruggedized market is under pressure from the dramatic growth in consumer tablets and their increasing commoditization.

The availability of cheap consumer tablets encourages experimentation on the part of commercial / industrial users.

While on the one hand this may diminish demand for traditional rugged products, it also has the effect of validating the market for portable hand held computing devices.


Rugged & Commercial

The fragility of consumer devices in a commercial, industrial or military environments ultimately results in greater demand for more rugged devices.

Xplore TechnologiesdDRS TechnologiesGetac Multitouch

The growing sophistication of users pushes demand for more technologically up to date, flexible and customizable designs.


Time to Market

To build a Commercial-Grade and/or Ruggedized tablet, you generally Start with “today’s” technology or technology standards, and engineer it to become the desired product.

Off the shelf is too fragile, doesn’t meet

needs.

Go to the drawing

board, design new product

Engineer the design

Prototype Testing Manufacturing

Sounds great, but….


Time to Market

…but, this process takes 12-18 months. In today’s technology cycle, that means the product that started-out being based on current technology is a generation or two obsolete by the time the “New” ruggedized or commercial version is available.

6-9 Months:Engineering

Validation & Test

6-9 Months:Design Verification

& Test

ThePRODUCT IS

12-18 MONTHS

OBSOLETE


Time to Market

The need for sturdy and even rugged tablets for commercial, industrial and military purposes is clear. Fragile consumer-grade equipment may be technologically advanced, but broken is broken.

12-18 MONTHS = TOO LONG.There is a

growing need for a solution with custom

options & capabilities, is sturdy enough, upgradable, and

isn’t obsolete

6-9 Months:Engineering Validation &

Test

6-9 Months:Design

Verification & Test

PRODUCT 12-18

MONTHS OBSOLETE

Starting with “today’s technology” to produce a custom/rugged Tablet:

“New” Rugged / Custom TabletIs based on 12-18 month-old tech:


Modular: The tablet evolved

New Market:Modular

(Market size - Source: VDC Research Group)


Price range: $900 - $1,200+ (excluding modules)

Shared Platform – leverage technology across multiple use cases

Longer useful life – avoid early obsolescence

Designed for both commercial & military users – Ruggedized IP66

User upgradable / accessible Secure communications protocols Android & Windows Weight: 2.5 – 3.0 lbs.

A new approach is needed – a tablet suitable for commercial or military and/or rugged use that is:

odem™ Extremely Modular Tablet PCEntegra Technologies

Modular: The tablet evolved


Example Modules & Options

Modular tablets would typically include standard options such as: Bar code / mag card readers

RFID / NFC

GPS / Location

Front and back cameras

Extended-life battery packs

Bluetooth, WiFi, Cellular (LTE, GSM, CDMA)

Multiple operating system options

Multiple CPU options

Specialized modules & options desired include: Custom / Military

Secure Communications

Interchangeable Environmental Sensors Testing equipment Custom

Integration with Enterprise Data


Airlines

CPG RetailHealthcare

Restaurants

Prospective Markets

The extremely modular tablet is aimed at markets where consumer-grade or simply rugged equipment is unsuitable, and a more upgradable, updatable and expandable solution is needed.

The slides that follow describe a use case for Airlines.


Airline Use Case: odem™ Core

odem CoreConfigured for each application

odem

Maintenance

Private Club Flight Attendants

Gate Agents

Flight Crew

Ground Support

In-Flight Entertainment

Check-In


Functions:• Reduce paper to one backup set per plane• Pilot pre-flight check-in & planning• Flight Plan, Flight Manual, Operating Manual• Jeppesen and Luthansa Lido flight data• Controlled migration from Class 1 to Class 2

without equipment change• Flight Deck Smart Dock Station

• Additional processing & memory for own ship real-time navigation (fast refresh)

• Virus Protection / Firewall• Certified Interface Protection Device• Access to Gate Wi-Fi, ACARS, Iridium, 3G• Synchs tablet to multiple aircraft type• M2M – Aircraft to Flight Ops – updates tablet upon docking with aircraft

Flight CrewFLIGHT CREWTablet w/ Smart Dock & Desktop Dock


Extra odem™ Features

• Wi-Fi, Cellular, GPS, Cyber Encryption

• NFC, Bar Code, Camera, CAC Reader

• Cockpit Smart Dock & Flight Ops Docking Station

FLIGHT CREW


FLIGHT ATTENDANTSTablet w/ Desktop Dock


Functions:

• Paperless Cabin – convert magazines & catalogs to e-versions

• Flight Crew / Passenger Interactions – personalize the on-board experience with duty free, ordering meals, identifying VIP & top tier passengers

Flight Attendants


•Wi-Fi, Cellular for Supervisors

•GPS

•Bar Code

•Magnetic Card Swipe

•Camera

FLIGHT ATTENDANTS


Functions:

• In-flight movies, web browsing, and other customer interactions

• Place duty free orders, messages to/from flight attendants

• Panel Mount – fixed in back of seat and can be removable

• Stand Alone – hand out tablets to premier customers

In-Flight EntertainmentIN-FLIGHT ENTERTAINMENTTablet & Panel Mount



• Wi-Fi

• Bar Code

• Camera

• Stylus

IN-FLIGHT ENT.


TICKET COUNTER CHECK-INTablet w/ Desktop Dock & Kiosk Panel Mount


Functions:

• Re-Invent Check-In Process (eliminate queues and counters with roving agents)

• Enhanced CRM (identify VIPs and top tier flyers and their preferences)

• Roving Agents (assist with bag track and trace)

• Passenger Re-accommodation

Check-In

Extra odem™ Features• Wi-Fi, GPS

• Cellular for Supervisors

• 2D Bar Code

• Magnetic Card Swipe

• NFC

• Camera

• Desktop Dock at Counter

• Panel Mount – RJ45

CHECK-IN



Functions:

• Re-Invent Boarding Process (eliminate queues with roving agents)

• Enhanced CRM (identify VIPs and top tier flyers and their preferences)

• Roving Agents (assist with bag track and trace)

• Passenger Re-accommodation

Gate AgentsGATE AGENTSTablet w/ Desktop Dock

Extra odem™ Features• Wi-Fi, GPS

• Cellular for Supervisors

• 2D Bar Code

• Magnetic Card Swipe

• NFC

• Camera

• Desktop Dock at Counter

• Panel Mount – RJ45

GATE AGENTS



PRIVATE CLUBTablet w/ Desktop Dock

Functions:

• Watch movies, TV

• Internet Access

• Order food and drinks

• Flight updates

• Tablet and/or Desktop Dock

Private Club


• Wi-Fi

• Stylus

• Magnetic Card Swipe, NFC

• Desktop Dock w/ keyboard & mouse

PRIVATE CLUB



MAINTENANCETablet w/ Mobile & Desktop Dock

MAINTENANCE

Functions:

• Eliminate current paper logs and reports

• Real time reporting of aircraft maintenance with ops and pilot

• Techs have complete maintenance manuals and “how to” videos

• Use RFID and GPS to track assets, location of tech, and status of repair

• Applies to line maintenance all the way up to heavy checks

Maintenance


• Wi-Fi & Cellular Radios

• Bar Code, RFID, & NFC

• GPS

• Camera (front & back)

• Mobile Vehicle Mount

• Docking Station w/ keyboard & mouse



GROUND SUPPORTTablet w/ Mobile Dock

GROUND SUPPORT

Functions:

• Ground crews have instant access on where and how to deploy around aircraft

• Real time updates on baggage / cargo loading – improves interaction with load planning team

• Use RFID and GPS to track assets (tugs), ground crew, and other support equipment

Ground Support


• Wi-Fi & Cellular Radios

• Bar Code, RFID, & NFC

• GPS

• Camera (front & back)

• Mobile Vehicle Mount



Extreme modularity is the new disruptive innovation that will allow commercial and military users to transcend technology advancements without having to replace the entire computing device – Adaptable, Flexible, Upgradable

Cost effective and rapid incremental end user specific technology upgrades will now be possible with the modular open hardware designs coming to market

In the not too distant future, upgrading the processor in your tablet computer will be as simple as replacing a postage stamp size component on the main logic board



In the end, companies need a tablet that fits in the undefined “white space” between consumer and ruggedized tablets that focuses on lower price, smaller size, less weight, increased modularity, and longer useful life.

Steve Carpenter, CEOEntegra Technologies


References

1. http://online.wsj.com/article/SB10000872396390444657804578048981461803220.html

2. http://www.nextbigwhat.com/pc-sales-decline-tablets-soar-globally-297/

3. http://www.networkworld.com/news/2013/030513-why-moore39s-law-not-mobility-267394.html?source=nww_rss

4. 4 - http://www.businessinsider.com/the-death-of-the-pc-tablet-sales-will-beat-notebook-sales-this-year-2013-1

5. 5 - http://www.pcmag.com/article2/0,2817,2391553,00.asp

6. 6 - http://www.statista.com/statistics/183419/forecast-of-global-sales-of-pcs-by-category/

7. 7 - http://www.idc.com/getdoc.jsp?containerId=prUS23660312#.UQg4L-hNfo0

8. 8 - http://www.statista.com/statistics/200248/forecast-of-tablet-pc-sales-in-the-united-states-from-2010-to-2015/

9. http://blog.vdcresearch.com/mobile_and_wireless/2012/09/growth-in-rugged-tablet-market-trying-to-make-up-for-the-loss-in-others.html

10. http://finance.yahoo.com/news/motorola-solutions-completes-psion-acquisition-104317916--finance.html

11. http://finance.yahoo.com/news/honeywell-acquire-intermec-600m-123622179.html

http://online.wsj.com/article/SB10000872396390444657804578048981461803220.html

http://www.nextbigwhat.com/pc-sales-decline-tablets-soar-globally-297/

http://www.networkworld.com/news/2013/030513-why-moore39s-law-not-mobility-267394.html?source=nww_rss



http://www.businessinsider.com/the-death-of-the-pc-tablet-sales-will-beat-notebook-sales-this-year-2013-1



http://www.pcmag.com/article2/0,2817,2391553,00.asp


http://www.statista.com/statistics/183419/forecast-of-global-sales-of-pcs-by-category/

http://www.idc.com/getdoc.jsp?containerId=prUS23660312

http://www.statista.com/statistics/200248/forecast-of-tablet-pc-sales-in-the-united-states-from-2010-to-2015/




http://blog.vdcresearch.com/mobile_and_wireless/2012/09/growth-in-rugged-tablet-market-trying-to-make-up-for-the-loss-in-others.html




http://finance.yahoo.com/news/motorola-solutions-completes-psion-acquisition-104317916--finance.html





http://finance.yahoo.com/news/honeywell-acquire-intermec-600m-123622179.html




About the Authors

Steve Carpenter is President and CEO of entegra technologies, with 36 years experience building global organizations in information technology services, healthcare technology services, customer relationship management, financial services, and retail media with companies including Affiliated Computer Services, ActionSystems, and MediaCart. Contact Steve at [email protected], and www.linkedin.com/in/stephencarpenter.


About the Authors

Patrick Seaman is Chief Technology Advisor to Pepperwood Partners and COO of the social publishing platform company WhichBox Media. Seaman is the former COO of the video eCommerce company Cinsay, and former Director of Technology at Broadcast.com. Patrick serves on the Advisory Board of Kraftwurx Inc, and Qples, Inc. and on the UT Dallas School of Natural Sciences & Mathematics Advisory Council, and is an IEEE member. Contact Patrick at [email protected], [email protected] and www.linkedin.com/in/patrickseaman/.


About Pepperwood Partners

Pepperwood Partners is a boutique investment banking advisory firm headquartered in Dallas, Texas. Pepperwood provides a suite of investment banking advisory services to businesses in the technology, media, telecom, nanotechnology, energy and alternative asset sectors. With a strong focus on institutional relationships in the Russian, European, and CIS regions, Pepperwood works with businesses to achieve capitalization and growth objectives.

Two Lincoln Centre5420 LBJ Freeway, Suite 535Dallas, Texas 75240 USA+1 [email protected]

Learn more at: www.PepperwoodPartners.com

Rise of the Tablet PC and the need for Extremely Modular Tablets

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