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iPad pricing for 3G models 'ridiculous,' says hardware guru

$130 surcharge for 3G capability may be subsidy for lowest-priced $499 models

January 27, 2010 11:22 PM ET

Computerworld - Apple's pricing for the iPad is "ridiculous," a hardware expert said Wednesday, as he argued that the $130 price difference for models with 3G means buyers of those tablets subsidize the lowest-priced $499 model.

"The iPad is surprisingly cheaper than I expected," acknowledged Aaron Vronko, the chief executive of Michigan-based Rapid Repair, who last week made a slate of tablet predictions. "But the $130 difference [between models] is a little ridiculous. 3G chips run in the mid-single-digits. For $7, you can get a really good one."

Apple has priced the iPad in an unusually complex matrix of two basic models -- one with Wi-Fi 802.11n connectivity only, the other with both Wi-Fi and 3G -- available in three memory storage configurations of 16GB, 32GB and 64GB. The Wi-Fi-plus-3G model of each is $130 more than the cost of the Wi-Fi-only iPad with the same amount of storage. In other words, while Apple will sell the Wi-Fi-only tablet in 16GB, 32GB and 64GB models for $499, $599 and $699, respectively, the iPad with Wi-Fi and 3G will cost $629, $729 and $829.

"Six models? And with only one display size?" Vronko asked, clearly taken aback.

No wonder, since Apple typically trims the number of models in each line to a minimum. The iPhone 3GS, for example, comes in just two configurations -- 16GB and 32GB -- while the iMac is available in just two models for each of two screen sizes.

"The fact that they came out with this segmented pricing tells me one thing: that they had to work harder than they thought they would have to make a pricing constraint," Vronko said.

The $130 price difference and the multiple models led Vronko to conclude that Apple had underpriced the less-expensive Wi-Fi-only iPad to make the magic sub-$500 price point. He speculated that buyers of the more expensive 3G-equipped iPads will, in effect, subsidize the relative bargain for Wi-Fi-only customers.

"My guess is that the 3G price is where Apple wanted the price of the iPad to be, but they felt a lot of pressure to hit a pricing mark," Vronko added.

Apple CEO Steve Jobs alluded to just that during the iPad rollout earlier today. "When we set out to develop the iPad, we not only had specific technical goals and user interface goals, but an aggressive price goal, because we want to put this in the hands of a lot of people," Jobs said.

"Five hundred dollars is going to turn a lot of heads," Vronko said. "That's where a lot of people will pay attention. At $600, though, they may [pause and] say, 'Do I really need this?' "



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