A couple of weeks ago Bloomberg reported that Apple is indeed planning to release a 7.85-inch iPad, as has been rumored in the past by other, smaller, media outlets. Now The New York Times has chimed in and report much the same- a 7.85-inch iPad is on it’s way and will cost “significantly less” than $499.
This move by Apple is seen as a reaction to competing 7-inch products from the likes of Amazon with the Kindle Fire and Google with the Nexus 7 which are priced lower than Apple’s entry-level iPad 2 which costs $399. This is obvious though. However, there are some that are reporting Apple is going to be very aggressive on pricing.
In fact, one report claims that Apple might be selling this smaller iPad at a lost just to stifle competition. I say no. Why would you do that? Even if you manage to drowned out competition that way, you now have a product with no profit margin, and if you do raise the price, you give competitors an opening to introduce a product that undercuts. No, instead of selling a boatload of these devices at a lost just to stifle competitors, Apple would rather sell a handful* (by comparison) at a profit**. That’s how they roll- that’s why they are the most profitable company in the world.
Another thing I believe is overlooked, is the fact that Apple has a manufacturing advantage and economies of scale on their side. For instance, from all indications, Apple will merely have to retime their machines to cut the displays into larger*** sheets for the new iPad mini. No new technology. No retooling. Just operations genius and a profitable device.
*Just look at the Mac market. Apple still only has 12% of PC marketshare, but garners a huge chunk of that market’s profits. Apple goes for the creme.
** Not a huge profit that the company is used to though. Apple is indeed going for marketshare with this move. But make no mistake, they will not be losing money on the device.
*** If the rumors are correct, the new iPad mini will be using the same displays that Apple has been using on the iPhone 3GS for three years now. In other words, this will likely be a larger 3GS-quality display and not a smaller iPad 3 retina display.