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Will Apple make preemptive strike, cut iPad price?

Time to get aggressive is now, before competition heats up this year, says retail expert

March 1, 2011 04:11 PM ET

Computerworld - Apple should get a jump on the tablet competition Wednesday by dropping the price of the iPad and expanding its distribution, an analyst said today.

Not that he expects Apple to follow his advice.

"They're not going to drop the price, that's not going to happen, maybe not until later this year," said Stephen Baker, an analyst with retail research firm NPD Group.

Still, he had a hope -- slim though it might be -- that Apple will, as he said, "shoot off a cannon in a tablet price war" Wednesday.

Apple is expected to introduce its next-generation iPad -- what most have already dubbed the "iPad 2" -- at an event slated to start at 10 a.m. PT in San Francisco. The company, as usual, has been closed-mouthed, and has done nothing but hint that the event will feature a new tablet.

The key to Apple's ability to compete with a growing number of tablet rivals later this year will depend on the moves it announces Wednesday, Baker said.

"Clearly by the fourth quarter, probably sooner, there will be a fight at retail for customer awareness and shelf space and price," said Baker, referring to the time when as many as 20 tablets from first-tier consumer electronics and computer makers, companies with a high consumer profile and lots of retail savvy, begin to show up.

That will make the important news from tomorrow's iPad event more about price and distribution and less about the specs of the device -- how thin it is, whether it has one or two cameras, what processor is inside -- argued Baker.

That's because Apple is notoriously against dropping prices except when it introduces a refresh of a product line.

"The only time I remember them doing that was with the first iPhone, and that was more an admission of a mistake in their business model," Baker said. In September 2007, just months after the launch of the original iPhone, Apple cut the price of the then top-end 8GB model by $200, from $599 to $399, and yanked the 4GB iPhone from the line.

Instead, once Apple locks in a price, it doesn't move the marker until a new model debuts, or in more cases, simply retains the existing price but beefs up the device's speed, memory or storage space. In its iPhone line, Apple typically takes a different tack: It drops the price of the previous model when it revamps the smartphone.

"They're not going to be the only [tablet] player in the back half of the year, so are they going to be the first mover on price? It would give them an advantage."



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