Mini wars: Apple tablet to battle Amazon, Google
SAN JOSE — Apple Inc.’s new iPad is small in size but not low in price -- and that’s got consumers grumbling and Wall Street worried.
By launching a 7.9-inch iPad mini that is as thin as a pencil and as light as a pad of paper, Apple threw itself into the market for smaller tablets currently ruled by its rivals.
But with a higher-than-expected price for the device, the technology giant may run into difficulty stealing customers away from Amazon.com Inc.’s Kindle Fire HD or Google Inc.’s Nexus 7. The iPad mini starts at $329. Many analysts and consumers had hoped to see a starting price of $250.
Investors appeared to be disappointed, sending Apple’s shares down $20.67, or 3.3%, to $613.36 on Tuesday after the company announced the new tablet at an invitation-only media event held at the California Theatre in downtown San Jose. Apple’s stock has now fallen 12.4% since it released the iPhone 5 on Sept. 21.
Apple, which in the past had resisted making a smaller iPad, sought to emphasize that the mini was not inferior to its 9.7-inch device, which was unveiled in 2010 and has since dominated the tablet market.
“It is every inch an iPad,” Phil Schiller, Apple’s senior vice president of worldwide marketing, told the crowd moments after introducing the long-rumored device.
“The full iPad experience. There’s less of it, but no less to it,” the company later reiterated.
But with it comes an Apple-worthy price tag. Many people pointed out that tablets with similar specs start at $199, including the 7-inch Kindle Fire HD. Amazon has been vocal about its strategy of making essentially no money from its hardware in favor of reaping profits from the sales of content such as digital music and e-books.
Apple, however, faced a high cost for iPad mini components and wasn’t willing to give up its cushy profit margins, analysts said.
That leaves “significant room” for its rivals to build competing tablets at more attractive price points, said Abhey Lamba of Mizuho Securities in a note to investors. “We believe a price point of $250 to $300 would have gone a long way in keeping competition at bay.”
Some consumers, too, were displeased.
“They dropped the ball,” said Ryan Michaud, 24, an assistant editor at a Los Angeles entertainment production firm. He had hoped that the iPad mini would be priced closer to competing tablets or would come with the high-resolution “retina” display included on the latest 9.7-inch iPad, which would better justify the price, he said.
But Bill Choi, an analyst at Janney Capital Markets, said although some investors were let down by the iPad mini’s price, he expected that the device would sell well among women and consumers 16 and younger.
“We don’t think Apple needs to compete aggressively on price against mini-tablets” running Google’s Android operating system, Choi said in a note to investors. “We recognize that competing 7-inch tablet products are priced starting at $199, but [we] see Apple providing a premium product with a superior ecosystem.”
Longtime Apple analyst Tim Bajarin, president of Creative Strategies, also shrugged off pricing concerns for the iPad mini, which weighs 0.68-pound and is 0.28-inch thick.
He said the device had at least one major advantage over many Android-powered tablets -- more than 275,000 apps designed for the iPad mini -- and predicted that the Cupertino, Calif., company would sell 5 million to 7 million iPad minis worldwide in November and in December.
Apple already sells the world’s bestselling tablet with the regular-size iPad. Apple Chief Executive Tim Cook said the company recently sold its 100 millionth iPad, 21/2 years after its debut, and said the iPad accounts for 91% of tablet Web traffic.
Analysts said Apple’s move into the smaller-tablet market is a sign that the company doesn’t want to cede ground to rivals amid a rapidly growing industry for portable touchscreen devices.
Worldwide tablet shipments are expected to total 117.1 million units this year, according to International Data Corp., which last month increased its 2012 estimate thanks to robust consumer demand. The firm also revised upward its 2013 forecast number to 165.9 million units from 142.8 million. Last year, worldwide tablet shipments totaled 70.9 million units.
“We know we are just getting started,” Cook said of the iPad product line. “We’re not taking our foot off the gas.”
The iPad mini, which will be available for pre-order Friday, will ship Nov. 2 for Wi-Fi-only versions and two weeks later for models that come with a cellular data plan. It comes in black and in white and is equipped with a FaceTime HD camera, iSight camera with HD video recording, speedy wireless and 10 hours of battery life.
At the media event, Apple also announced a slew of updates to existing products, including the fourth generation of its 9.7-inch iPad, a 13-inch MacBook Pro with retina display, an improved Mac mini computer and a redesigned iMac desktop computer with a 5-millimeter edge.
Cook also said more than 200 million devices are using iOS 6 since the operating system was released a month ago.
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