2012: Apple market widens on 7-inch iPad claims

By Jonny Evans

2012 is a year that matters. Some say it's a year of change. For CEO Tim Cook it should be the year he leads Apple [AAPL] to consolidate its leadership with this year's crop: the iPhone 5, new Macs, iTunes and, of course, this fabled new 7-inch iPad the company may, or may not, have planned.

[ABOVE: A poor-quality video clip featuring Apple's latest iPhone ad, starring Samuel L Jackson.]

Tell all the people

This could be the year Apple begins to widen its addressable markets by aiming at the low-end. If this happens it will hit the new targets with distinctive products introduced at industry-challenging prices. Such new products could include the 7-inch iPad, the iPhone nano, or the retention of a low-cost iPhone 4 in the range on launch of iPhone 5 in Fall.

(I have heard the argument Apple doesn't "play" in low price markets before. This is no longer true. This is why iPads are almost impossible for competitors to match on features/price).

Apple's plan for a 7-inch iPad is speculation du jour, and while company co-founder, Steve Jobs, famously rejected such devices as not being large enough, the devices do seem popular among those who buy them. Amazon Fire folk, basically.

Putting out fires

To be sure, these things are no way as popular as the iPad, but competing in the space makes strategic sense: why should Apple cede this part of the market, effectively allowing its statistics-loving foes to declare the tablet's "declining market share" as cash-strapped consumers choose smaller, less interesting Android-powered devices because they're "like an iPad", but cheaper.

With that as a strategic imperative it makes sense for Apple to drop the smaller 'Pad bomb.

What does it have to lose?

10-inch iPad sales may suffer a little, but those who want the best will still choose the best: Those 55 million plus iPads already out there in people's hands are the best ambassadors the company needs -- people love them. The occasional iPhone/Siri ad featuring Samuel L Jackson (who sadly doesn't shout: "There's an iPhone on the **** plane!") cements Apple's forward march as it defines the so-called "tablet industry" as the iPad industry it has already become.

Poker face

A smaller iPad would make perfect sense as an eBook reader -- about the size of a paperback. It would offer better features than anything the Amazon/Android hybrid can offer, including iOS levels of usability. Best of all, given Apple's economies of scale when it comes to component acquisition, would crack the market at a price guaranteed to maximize the pleasure and the pain of the company's enemies, chained as they are to higher component prices than those Apple can command. Rumors claim this imaginary 7-inch iPad will cost $250.

This isn't just about the iPad. It's about growth. More specifically it's about growth in an ailing economy. While most PC manufacturers (bar HP) are suffering shrinking market share, Apple is not. In order to maintain growth in a recession I suspect we haven't put behind us yet, Apple knows it must appeal to lower price margins.

Shaw Wu of Sterne Agee says: "We have picked up evidence since 2009 of Apple working with smaller, as well as larger screens ranging from 4-inches to 12-inches that could be used in a future iPad, iPod touch, and/or iPhone or even MacBook. We do not sense that the release of an iPad mini is imminent and quite frankly, exact timing is difficult to predict. However, we do believe it makes both fundamental and strategic sense for Apple to address at some point."

He says, "Reports also indicate that despite a smaller 7 or 8-inch screen, the resolution will be the same as the iPad 1 and iPad 2 at 1,024-x-768."

Dream on

This could also mean an opportunity for smaller iPhone devices. Presently Apple addresses low cost markets by offering the iPhone 4S alongside the iPhone 4. Previously it has also offered the 3GS. In future I see the 4 series iPhones being made available beside the iPhone 5.

If I'm honest, I also see opportunities for low-cost communication devices equipped with Siri voice controls, older processors and smaller displays. The iPod nano could be a perfect example of a product I'd like to see called the iPod phone.

To be fair I've been bleating on about such a product for years. It hasn't appeared, and perhaps never will, but if Apple wants to strike a death blow against those players in the feature phone market, a product such as this would be the one.

Apple's focus on emerging economies will also propel future growth.

New iTunes features and a range of new, fast Macs will complete the company's 2012 pitch. Widening the addressable markets for all its products will help reinforce its position as the world's leading technology firm.

Just in time for Microsoft's attempt to recover its own lost fortunes in the tech market with Windows 8. 2012 is a year of change. It will be interesting to see what changes.

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