) wants to sell consumers a Nexus 7 with 32GB memory for just
$249 -- the same price as the 16GB model that is currently
available. Based on the
that leaked in the United States and in the United Kingdom, it
seems that Google will release the upgraded tablet in time for
the 2012 holiday shopping season.
This is not necessarily a technical problem for Apple (NASDAQ:
), which is expected to unveil a smaller iPad on October 23. But
it places enormous pressure on the Cupertino, California-based
company to build an affordable, large-capacity tablet.
When the tablet market began to heat up in 2010, Apple was
credited with releasing the best tablet in its class. For $499,
consumers could take home a device that was vastly superior to
its competitors, which retailed for the same price.
Today, Amazon (NASDAQ:
), Barnes & Noble (NYSE:
) and other manufacturers offer cheaper alternatives. While Apple
loyalists will argue that there is still a distinct difference
between the iPad and the Kindle Fire or Nook HD+, the price
savings is more than enough to
win over some consumers
. While Apple likes to think of itself as a manufacturer of
premium products, it is not in the company's nature to disregard
those lost sales. If it were, the Mac maker would not have
developed a seven-inch tablet.
When Apple unveils the iPad Mini, it will have a lot to brag
about, starting with the App Store. Tim Cook, Apple's now-famous
CEO, is likely to walk out on stage and talk about what a
wonderful success the App Store has been and how it is the most
important venue for mobile applications. Cook can also talk about
the millions of iPads that have already been sold, the millions
of books that have been read and the billions of songs that have
been downloaded. These are Apple's ongoing bragging points.
Then Cook will be expected to unveil an iPad Mini that fits
into the company's pricing structure without killing off one or
more of its products, a task that seems all but impossible to
Right now, Apple sells a four-inch 32GB iPod Touch for $299.
The 64GB model goes for $399, the same price as the 16GB iPad 2.
The 16GB third-generation iPad sells for $499.
At the lower end, Apple offers the 2.5-inch iPad Nano for $149
and a 3.5-inch iPod Touch for $199. Both come with 16GB of
memory, but iPod buyers can double it for an extra $50.
Thus, Apple has already covered every possible price point. It
not left any room
for the iPad Mini.
If Apple wants the iPad Mini to succeed, the company's
strategy will have to be based on added value. But even that
could make it difficult to sell the new device.
Suppose that the iPad Mini starts at $299 for an 8GB model.
This would be
$20 less than the rumored MSRP
and $50 more than the
price consumers want
. After reiterating the benefits of the App Store, the Retina
Display, the iSight Camera and all the other iDevice features,
Apple will then have to explain why consumers should buy an iPad
Mini over the four-inch iPod Touch, which comes with four times
as much memory.
The obvious answer is the larger screen. If Apple uses that
logic, however, then consumers might as well spend another $100
and get an iPad 2.
Based on everything that is known about the iPad Mini, it
seems unlikely that the device will be much more powerful than
the iPad 2. It might have a
new kind of display
or some other tantalizing feature. But in terms of raw power, the
second-generation iPad is likely to be a solid competitor.
That right there is another problem Apple is about to face.
When the iPad Mini is released, the company will inevitably
compete with itself.
What if Apple goes all in and charges $249 for an 8GB model?
First and foremost, it would reduce the relevance of the older
3.5-inch iPod Touch (and to some extent the new iPod Nano).
Second, Google could still brag that it offers four times as much
memory for the same price. That may not matter to Apple loyalists
that have pledged their lifelong support for the company's
products. But it could sway consumers who are preoccupied with
value. In that sense, the 32GB Nexus 7 will appear to be the
No matter what price Apple chooses, the company is going to
encounter a number of new challenges. Meanwhile, it seems that
Google has positioned itself for growth in the low-end tablet
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.