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Can a $99 Tablet Take Down the iPad Mini?

Posted
12/26/2012 1:54:00 PM
By: Benzinga
Referenced Stocks:AAPL;AMZN;GOOG;HPQ

For most individuals, Santa brought a cornucopia of electronics, gift cards and items to exchange or return. Tech bloggers found an extra surprise in their stockings: reports of another iPad upgrade and an Acer tablet priced at $99 . The products sound promising -- Apple (NASDAQ: AAPL ) will reportedly release a thinner and lighter version of the full-size iPad. The company may also add a Retina Display to the iPad Mini. Meanwhile, Acer is believed to be developing a low-cost tablet that will retail for $99 in China and other emerging markets. It is not yet known if Acer's seven-inch device, which has yet to be confirmed, will come to the United States.

Acer is the second company that is rumored to be developing a $99 tablet. Asus, which produced the Nexus 7 for Google (NASDAQ: GOOG ), recently denied a report that it would do the same.

As an emerging market tablet, Acer's $99 device will compete with a number of high-end products from big manufacturers, including Apple. It may soon compete with Amazon (NASDAQ: AMZN ), which has been setting the stage for a Chinese invasion . However, Acer is designing the tablet to compete more effectively against white-box tablet makers from China, which already produce cheap tablets.

Thus far, consumers seem to prefer the higher-end products that Apple develops. The iPad has dominated the tablet market since the day it was released. That domination continued in China last quarter when Apple produced more than 70 percent of the tablets sold in the nation. With a starting price of $329 in America, the iPad Mini is anything but cheap.

If Acer is able to charge 1/3 of that price, it could prove to be a positive move for the manufacturer. Consumers are not easily persuaded to make a generic tablet purchase. After releasing the HP TouchPad, Hewlett-Packard (NYSE: HPQ ) learned that a lower price can change everything .

However, Hewlett-Packard had one advantage that other cheap tablets do not. By starting at $499, consumers thought of the HP TouchPad as being an expensive high-end alternative to the iPad. No one bought it at that price because they figured that if they were going to spend that much money they might as well get an iDevice. That changed the moment Hewlett-Packard lowered the price to $99, at which point consumers believed that they were getting a $500 tablet for 1/5 the price.

In order for Acer's $99 tablet to achieve a high level of success, the company needs to convince consumers -- in China, America or anywhere else in the world -- that they are getting a device of a much higher quality than the price suggests.

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