SAN JOSE, (Reuters) – Apple Inc will begin to sell an 8-inch version of the iPad on Friday to compete with Amazon.com Inc’s Kindle and other smaller tablets, but it set a higher-than-expected price tag of $329 that Wall Street fears could curb demand.
The 7.9 inch “iPad mini” marks the iPhone-maker’s first foray into the smaller-tablet segment. Apple hopes to beat back incursions onto its home turf of consumer electronics hardware, while safeguarding its lead in a larger tablet space – one that even deep-pocketed rivals like Samsung Electronics have found tough to penetrate.
Apple Chief Executive Tim Cook and marketing chief Phil Schiller took the wraps off the new tablet, which essentially has most of the functions and features of the full-size iPad but in a smaller package.
Priced at $329 for a Wi-Fi only model, the iPad mini is a little costlier than predicted but some analysts see that as a bid to retain premium pricing levels. Others fear the gadget will lure buyers away from Apple’s $499 flagship 10-inch iPad, while proving ineffective in combating the threat of Amazon’s $199 Kindle Fire and Google’s Nexus 7, both of which are sold at or near cost.
“Apple has always been a premium hardware manufacturer. It’s basically a hardware company and they don’t have Google advertising or Amazon’s online store to fall back on,” said Destination Wealth Management CEO Michael Yoshikami. “But people are happy to pay a premium because it’s quality hardware, and the ecosystem (of content and apps) cannot be underestimated.”
JMP Securities analyst Alex Gauna said, however, “It’s coming in the range that most were grumbling about and that, quite frankly, we’re a little bit concerned about.”
“It’s a little confusing at this juncture to try and figure out how it fits into the line-up. Is it going to cannibalize the more expensive iPad?” he said.
“It is worth noting that there are zero-margin products out there competing with them now … and that is presenting some challenges to Apple.”
The iPad was launched in 2010 by late Apple visionary Steve Jobs and since then it has taken a big chunk out of PC sales, upending the industry and reinventing mobile computing with its apps-based model, often called an ecosystem.
A smaller tablet is the first device to be added to Apple’s compact portfolio under Cook, who took over from Jobs just before his death a year ago. Analysts said it may have been Google and Amazon that helped influence the decision.
In a surprise move, Apple also announced yesterday a fourth-generation full-sized iPad just six months after unveiling a third generation device to much fanfare. The latest tablet, which again sells for $499, is faster and slimmer and comes just days before Microsoft is due to show off its own “Surface” tablet.
Apple also unveiled thinner MacBook Pro laptops, including a 13-inch Retina display.
WEIGHT IMPRESSES
Frank Gillett, an analyst with Forrester who attended the event, said he was impressed with the lightness of the iPad mini, with which he had a chance to play after the event.
“Apple went for the high end of what people have been thinking of,” Gillett said, adding Amazon and Google may have to adjust their own p r oduct lineups to compete with the iPad mini.
