Apple's Rumored iPad Mini: A Game-Changer?

Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As analysts scramble to estimate iPhone sales, another important catalyst lingers in the shadows: The so-called iPad Mini. Even the Wall Street Journal has officially acknowledged its existence in a claim stating that Apple (NASDAQ: AAPL) has begun mass production of "a new tablet computer smaller than the current iPad." It is definitely time to attempt to estimate how an iPad Mini would affect Apple's earnings. Is it a game-changer? I think so.

Let's rewind to January 2010. It seemed like there was only one thing to talk about in the tech world: Apple's rumored tablet. Extreme headlines like Apple Tablet: One Tech Gadget For All filled prominent magazine covers and front-page newspaper headlines. But on Jan. 27, 2010, when the iPad was revealed, there was still plenty of skepticism, even though the product was right before our eyes. Many complained that it was simply an iPhone with a larger display. Even bullish Apple analyst Gene Munster estimated sales of only 3.5 million in the first year. Boy, was he wrong.

Turns out that Apple's "enlarged iPhone" was an incredible game-changer. So far, more than 85 million iPads have been sold. 86% of the Fortune 500 companies are deploying or are testing the iPad, and by July 24, 2012, Apple had sold more than 1 million iPads to high schools and universities year to date, doubling its sales to schools in 2011.

What does the game-changing iPad have to do with the iPad Mini? With the iPad Mini, Apple is not simply extending its product line -- it's entering an entirely new market. Yes, there will be some cannibalization. But embracing cannibalization has helped Apple reward shareholders over the last two decades. Case in point: the iPad cannibalizing the sales of some Macs. Were any Mac sales lost to the iPad worth it? Absolutely.

Similarly, in exchange for some cannibalization of iPad sales with the introduction of the iPad Mini, Apple will likely introduce a lower-priced, smaller tablet that e-reader fanatics, children, and teens can easily adopt with enthusiasm. Apple's beautiful design, seamless UI, breadth of content, and competitive price points could offer a tempting value proposition to new customers and current small tablet users around the world.

The iPad Mini should fare well in the market. With 85 million iPads already sold, and the iPhone on track to sell more than 200 million units in 2013 alone, iOS will offer the most familiar interface in the small tablet market. With Apple's iPad priced at $499, many analysts are estimating an iPad Mini entry price around $299 or even less. This would offer tough competition to Amazon's (NASDAQ: AMZN) 7" Kindle Fire HD and Google's (NASDAQ: GOOG) Nexus 7, both priced at $199.

The bottom line
Apple's iPad Mini will definitely be a game-changer. To what extent? It's tough to tell--but I sure wouldn't short Apple with the iPad mini around the corner.

DanielSparks owns shares of Apple. The Motley Fool owns shares of Apple,, and Google. Motley Fool newsletter services recommend, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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