When Apple unveiled its new smaller version of the iPad, the iPad Mini, at its Oct. 23 media event in San Jose, Calif., the tablet wowed many with its impressive ability to offer most of the iPad experience in such a tiny package. Apple's $329 pricing for the device did not fare as well.
Apple Inc's iPad mini should attract new customers, but the higher-than-expected price is unlikely to threaten lower-cost tablets such as Amazon's Kindle tablets, said numerous analysts.
The 7.9-inch mini version of the iPad has most of the flash of the full-size $499 iPad but is cheaper by $170. However, the $329 price for the entry level Wi-Fi only version was higher than many analysts had expected, and some said the device might struggle to compete with the cheaper Amazon Kindle Fire tablets and Google Inc's Nexus 7, which have prices starting in the $159-$199 range.
"We were hoping the price would be at least a little lower given its competition is situated as low as $99, with many starting in the $199-$249 range," Barclays Capital analyst Ben Reitzes said.
Strategy Analytics analyst Peter King, who had also been expecting a $300 price point, says the extra $130 will be enough to sway some buyers toward the Nexus 7, the Kindle Fire family or even Barnes & Noble's $229 Nook HD. But it won't be enough buyers to hinder Apple's momentum.
"Yes, [Apple's competitors] will sell some, their aggressive pricing will definitely appeal to budget-restricted buyers and ensure that they do get some market traction," King wrote in an Oct. 23 blog post. "But given that the market leader, who has already sold 100 million iPads, has now entered the 7-inch area, the bar has been raised again for Google, Amazon and B&N."
This summer, Google, with help from Asus, introduced the $199 Nexus 7, and in September Amazon introduced the $199 Kindle Fire HD, calling it "the best high-end tablet anywhere, at any price."
Some analysts are also convinced the iPad Mini will cannibalize iPad sales, while others, such as Nomura Equity Research, think the high price tag will actually protect Apple from the product eating into its margins
According to Needham & Co analyst Charlie Wolf, regardless of cannibalization, the mini should greatly expand the market for iPads, whose sales have exceeded 100 million units in just two-and-a-half years after the tablet was introduced.
Apple's iPad Mini is also likely to steal more sales away from the weakening PC market, according to J.P. Morgan analyst Mark Moskowitz.
"In our view, the iPad Mini stands to target price-sensitive users and the e-reader crowd," Moskowitz said in an investors note. "Given the global economic uncertainty, we think price-sensitive users could gravitate toward an iPad Mini instead of making a PC purchase."
In difficult economic times, consumers opt for "feel good" purchases, said the analyst, giving the edge to the iPad Mini and other tablets over PCs.
Demand for Google's Nexus 7 and Amazon's Kindle Fire is unlikely to be much affected much by the launch of the mini given the gaping price gap, Nomura Equity Research said.
The iPad mini will help Apple reach a new customer base that may not have been able to afford the higher-end version, Canaccord Genuity analyst Michael Walkley said.
"While we believe these strong sales will come largely at the expense of Apple's competition, we concede iPad Mini will likely cannibalize iPad and iPod Touch sales," Walkley wrote in a research note.
Walkley was "impressed with both the features and pricing of the new iPad Mini," with which they expect "Apple will cement its dominant market share of the fast-growing tablet market, despite increased competition."
"We anticipate strong sales of the iPad Mini, especially as gifts during the holiday quarter," wrote Walkley. "Further, we believe the iPad Mini significantly expands Apple's tablet addressable market internationally and should lead to strong sales throughout [2013] as international distribution increases."
Apple will enjoy a very happy holiday season on its refreshed product line and because of the "hopelessly backlogged" iPhone 5 orderbook, he said.
Barclays estimated iPad mini sales at more than 5 million units in the December quarter, while Canaccord Genuity forecasts sales of 9.25 million units during the three-month period. Apple sold about 17 million iPads in the quarter that ended June.
iPad Mini Specs
You'll be able to get an iPad Mini Wi-Fi model in three memory configurations starting on November 2: $329 for 16GB, $429 for 32GB, and $529 for 64GB. Two weeks later on November 16, we'll see Wi-Fi + 4G models hit the shelves at $459 for 16GB, $559 for 32GB, and $659 for 64GB.
The 1,024x768-pixel resolution matches that of the iPad 2, but on a 7.9-inch display. "This definitely isn't Retina Display, but it's better-than-iPad-2 display. Videos look excellent, and the IPS screen has great wide-viewing angles," said CNET.
Includes a front-facing 720p-capable FaceTime camera, and a 5-megapixel back camera, and also supports 4G LTE, 802.11a/b/g/n Wi-Fi at 5.2Ghz, Bluetooth 4.0, and will use Apple's Lightning connector, first seen on the iPhone 5.
Apple claims that the Mini has a 10-hour battery life. Preorders for the iPad Mini in all its forms start on Friday.