iPad Mini, priced at $299, would 'crush' tablet rivals, says analyst

IHS iSuppli says 'very solid' bet that Apple will launch an 8-in. iPad in 4Q 2012

Apple could price an 8-in. iPad as low as $299, an analyst said today, as part of a strategy to "crush the opposition."

Rumors of a smaller iPad resurfaced earlier this week after the Wall Street Journal, citing unnamed sources, reported that Apple was contemplating a tablet with an 8-in. display.

Then, several experts expressed skepticism that Apple would introduce a tablet with a screen smaller than the current 9.7-in. size of the current iPad.

Rhoda Alexander, senior manager of tablet and monitor research at IHS iSuppli, disagrees. "Based on our sources, we're very solid [in our belief] that Apple will release a smaller iPad that uses a 7.85-in. display, essentially an 8-in. screen, this year," said Alexander.

iSuppli's projection for a release: The fourth quarter of 2012.

With savings from downsizing the display and associated touchscreen, and perhaps reducing the storage memory to a default 8GB, Apple could price what Alexander's dubbed the "iPad Mini" -- perhaps a sop to the Mac Mini name that Apple uses for its petite desktop Mac -- as low as $299, although $349 would be another option.

"Apple doesn't need to compete with the $200 price point," Alexander argued, referring to the price tag of Amazon's Kindle Fire, a 7-in. device the e-tailer started selling last November.

Adding a smaller iPad would let Apple address several issues, said Alexander.

"There's a certain segment of the consumer base where the current iPad is just too big," she said. "And Apple would have the opportunity to dual-sell some people." There are some consumers, she explained, who would like to have multiple tablets, a larger one for around the house and a smaller one to take with them.

But the most important motivation would be to give the company a way to stomp the competition. "Rather than just maintaining their dominance of the tablet market share, a smaller iPad would let them make a move to crush the opposition," said Alexander.

Her reasoning was based on tablet numbers from the fourth quarter of 2011.

During those three months, Apple's share of all tablet unit sales dropped to 57% from the prior quarter's 64% as lower-priced rivals, particularly the Kindle Fire and Barnes and Noble's Nook tablets, sold in volume.

The introduction of the Fire and Nook, especially the former, forced other Android tablet makers to slash prices to move inventory, a strategy Alexander said was unsustainable.

By expanding the iPad line to include a smaller device -- as well as launch an iPad 3 and retain the now-current iPad 2 at a lower price -- Apple would be in position to grow its share, perhaps to the point next year when it could again account for an overwhelming majority of tablets shipped and sold.

"Tablets are replacing PCs for a lot of people, and like success in the PC market, tablet makers need several product families," said Alexander. The addition of an 8-in. iPad would give Apple a "richer product family," she added.

iSuppli believes that Apple will move on an 8-in. iPad in time for the 2012 holiday sales season, a period that brought the company huge success in 2011, when it sold a record 15.4 million iPads, 111% more than the same quarter the year before.

The research firm -- which regularly estimates the BOM, or bill of materials, of future or current electronics products -- has not yet settled on cost projections for a smaller iPad, said Alexander, because the tablet is "vaporware." Instead, it's modeling several possible configurations.

"I'd be surprised if [an 8-in. iPad] came in the same number of models as the [larger] iPad does now," Alexander said. Instead, she would expect Apple to settle on one or two entry-level, lower-priced models, if only to contrast them to the full-sized iPad.

Apple did the same in 2010 when it revamped the MacBook Air line, offering a new lower-priced 11-in. model that is consistently outsold by the larger, more-expensive 13-in. configuration when customers start comparing the two, then end "buying up."

One possibility: An 8-in. iPad with just 8GB of storage space, or half the amount in the lowest-priced iPad 2, that comes in both Wi-Fi and 3G flavors.

Like other analysts, Alexander is betting that Apple will keep the iPad 2 in its tablet line-up after launching the iPad 3, as most have called the next model, and will cut the price of the older device, as it did the iPhone 4 last year after introducing the iPhone 4S. A $100 price cut, which would start the iPad at $399, is more than doable, she said.

"As we move out into 2012, the pricing of the iPad has got a lot of wiggle room," Alexander said. "They can knock it down by $100, but actually they have the room [in the cost-to-build] to knock the iPad 2 down more than that."

She dismissed concerns by some that adding a smaller iPad to Apple's offerings would force developers to support another screen resolution -- an 8-in. would sport the same format of 1,024-by-768 pixels as the current iPad, she said -- or that

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

Copyright © 2012 IDG Communications, Inc.

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