With PC sales only continuing to worsen, the success of Microsoft's Windows 8 largely depends on the success of the tablets that run the new OS. If numerous industry analysts are correct though, the price of Apple's iPad mini could hobble Microsoft out of the starting gates.
In addition to expectations the iPad Mini would hurt the PC market, the tablet's price is now also expected to negatively impact devices running Windows 8.
While some pointed to 7-inch Android tablets such as Google's Nexus 7, and Amazon's Kindle Fire HD as the iPad mini's true rivals, Sterne Agee analyst Shaw Wu said in an investor's note that the iPad Mini's real competitors are Windows 8-powered tablets and PCs.
"We continue to believe iPad Mini is the competition's worst nightmare and will likely slow down adoption of competitor tablets," Wu said. "In particular, we believe this could end up being a very tough holiday season for Windows 8."
The analyst believes the iPad Mini's $329 price tag will attract consumers more when compared some of the new Windows 8 devices that have higher prices. Wu referred to Microsoft's $599 Surface RT tablet that is "arguably overpriced." While consumers may believe the iPad Mini is overpriced when compared to other 7-inch tablets such as Google's Nexus 7, Wu suggested that Apple is actually just following its normal strategy.
"This controversy reminds us of what happened with iPod Mini and iPod Nano," he said. "Both predecessors were criticized as being overpriced but went on to do much better than expected. The key reason being high quality at a reasonable price, and we see something similar here."
The iPad mini, which launched in the U.S. and U.K. Nov. 2, sold out of its initial pre-order inventory in 23 minutes. As for its price, Apple believes the tablet's quality warrants the premium price tag, and they aren't backing down.
Speaking to the media at its San Jose, Calif. Event Oct. 23, Apple CEO Tim Cook revealed that "the iPad mini has higher costs and gross margin is significantly below our corporate average," suggesting the company couldn't have priced it any lower or it wouldn't be able to turn a profit on the device.
"One of the things we try to do is to create a product that people will love for months and years and continue using," Cook said.
"That's what iPad mini is designed to do. You can see that more broadly on iPad by looking at the usage statistics. Over 90 percent of web traffic from tablets is from iPads. Apple will not make a product that somebody may feel good about for the moment, but then won't use when they get home. That's not the experience we want our customers to have. I would encourage you to use an iPad mini and I don't think you'd be using anything other than an iPad once you do that," he continued.
Expected to hurt PC sales even more
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.
Analysts predict iPad mini will steal sales from Google, Amazon, Barnes & Noble 7-inch tablets
Starting at $329, the iPad Mini is pricier than other mini tablets, but the product will still capture sales from lower-priced rivals, according to J.P. Morgan analyst Mark Moskowitz.
Though the price tag on Apple's new smaller tablet was substantially higher than J.P. Morgan's prediction of $249, the features and specs were better than expected. Moskowitz estimated that the base model would start at 8GB of storage, but Apple doubled that with 16GB. The Mini lacks the Retina display of its bigger sibling, but Moskowitz was still impressed by the "look-and-feel" of the small tablet.
"In our view, the larger screen size and iOS 6 capabilities of iPad Mini stand to be good enough to grab share from the $199 tablet crowd," Moskowitz said in an investors note released Oct. 23.
"We think the iPad Mini, coupled with the 4th-gen iPad, underscores Apple's accelerated refresh rate of important devices and software," Moskowitz said. "With the iPad Mini and the new 4th-gen iPad, we believe Apple does not plan to forgo the profitable parts of the lower-end segments in tablets."
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."
iPad Mini Specs
You'll be able to get an iPad Mini Wi-Fi model in three memory configurations: $329 for 16GB, $429 for 32GB, and $529 for 64GB. Starting Nov.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.