A New 7 Inch iPad Could be Another Right Move from Apple
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
According to Rene Ritchie from iMore, Apple (NASDAQ: AAPL) is working on a 7 inch version of the IPad to be launched in October during the presentation of the new iPhone. The most interesting part of the rumor is that the product is said to be priced in the $200 to $250 price range. That would be a very smart move from Apple, and it could deliver a nasty punch in the mouth to competitors like Amazon (NASDAQ: AMZN), Samsung, and Research in Motion (NASDAQ: BBRY).
There is one main reason why someone would buy a tablet from another company instead of an iPad: pricing. Products like Kindle Fire sell at $200 and that´s a big difference versus $500 for the cheapest new iPad model. If Apple were to offer an iPad near that price range, companies like Amazon could be in big trouble to keep their products competitive.
Amazon has been gaining a lot of market share in the Android operated tablet business because it has found a competitive strength in low pricing, while Samsung and RIMM have been caught in the middle, not being able to offer a compelling alternative to iPads in quality or price. Comscore reports that Amazon had more than 54% of the Android tablet business as of February of this year.
If this rumor is confirmed, and Ritchie has been spot on with Apple related rumors in the past, Apple could destroy Kindle with this new version of iPad. From a business point of view, the best reason for Apple to do such a thing would be asphyxiating the competition, at least in the short term.
The new product could have a negative impact on Apple´s margins, cannibalizing sales of the existing iPad models and also probably hurting sales of iPod Touch. The decision would probably be polemic among financial analysts.
But Apple is not the kind of company that worries too much about such things like cannibalization; Steve Jobs has always been focused on developing the best products and allowing the process of creative destruction to follow its own course, even among Apple´s own products. It looks like the cultural legacy of Jobs is alive and healthy in Tim Cook and the rest of the management team.
If Apple where to follow this strategy, it would be doing something very similar to what it has done in the MP3 player market: launching different products with various sizes and price tags in order to fit the needs of different users.
At the end of the day, the decision about launching or not this smaller iPad will not be made thinking about profit margins or even competitive dynamics. Apple will try to figure out if this new product provides something valuable: a better user experience, more portability, or a more beautiful design, for example.
Apple has achieved a tremendous financial success by focusing on delivering the best products it can build and always searching for excellence and permanent innovation. Other companies which pay more attention to short term profit margins or the opinion of Wall Street analysts have paled in comparison. It looks like being a rebel in the corporate world can be very profitable for shareholders in the long term.
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