Apple's iPad mini pricing: Did it miss the tablet death blow?

Apple's iPad mini pricing: Did it miss the tablet death blow?

Summary: The iPad mini expands the total addressable market for Apple and strengthens its hammerlock on the tablet category. But Apple could have delivered a death blow to rivals with a lower price.

TOPICS: Tablets, Apple, iPad, Mobility

Apple's move to price the iPad mini at a starting price of $329 may preserve profit margins, but ultimately may cede some of the tablet market to the likes of Amazon and Google's Android army.

The $329 price tag was viewed as a negative development among a few analysts and tech observers on Twitter. Indeed, the $329 price for the iPad mini is tricky and appears to be designed to ensure iPad 2 sales are cannibalized instead of the latest version of the popular tablet.

Analysts were mixed on the iPad mini pricing. The general theme is that the iPad mini expands the total addressable market for Apple and strengthens its hammerlock on the tablet category. However, Apple could have delivered a death blow with a $299 price. Despite all the bluster about Google's Nexus 7, the price difference between the Android tablet and iPad mini makes the comparisons tricky.

More: Apple's iPad mini: it's all about price elasticity | With new iPads, Apple targets education opportunity | Google and Amazon can breathe a sigh of relief as Apple skips competing on price with iPad mini | Apple gets official with iPad mini; upgrades iPad again | Apple statement

Wall Street analysts made the following moves:

  • First, iPad shipment estimates for the current quarter were cut.
  • Many analysts said that refreshing the latest iPad so soon would alienate customers.
  • And many expect the iPad mini to sell well.

What remains to be seen is whether Apple bet on a price tag of $329 for the iPad mini when it could have priced it at  $299 and nailed the market. Morningstar analyst Brian Colello sums it up:

We're a bit disappointed at the starting price point of $329, as we fear that price-sensitive consumers may continue to turn to alternative tablet solutions, such as Amazon's Kindle Fire and Google's Nexus tablet at $200 price points...Apple could have strengthened its narrow economic moat by bringing more customers onto the iOS platform, as we believe that iOS customers who own multiple Apple products face higher switching costs and are less likely to shift to alternative platforms. Instead, the opposite scenario may play out. The risk around the mini, in our view, is that Apple's Mini pricing may concede more of the low-end tablet market to Amazon and Google, running the risk that these Android tablet users may buy compatible Android phones and/or shy away from Apple iPhones in the future.

Other Wall Street analysts were worried about the iPad mini price, but not by much. Piper Jaffray analyst Gene Munster said he thought consumer demand would still be strong.

Barclays analyst Ben Reitzes said in a research note:

We were hoping the mini could be priced at least a little lower given its competition is situated as low as $99, with many starting in the $199-$249 range. That being said, Apple seems convinced that consumers want the iPad and its ecosystem, which has worked so far at the high-end. We believe Apple can sell 5-10 million iPad mini’s in the December quarter while cannibalization of the other iPads will likely run at 25-50%.

In the big picture, Apple, which is built to sell hardware at a premium, went with profit margins over worrying about the low end of the market. Time will tell if Apple missed a death blow, but with 100 million iPads sold the company can afford to take a few chances.

Topics: Tablets, Apple, iPad, Mobility

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  • iPad mini price

    All Google has to do now is drop the price of the 8 gig Nexus 7 to $149, next week.
    Have an iPad 3 - 6 months old... last Apple product I will ever purchase... burned once that's it.
    Now all the apple users please don't explain why I wasn't burned.
    Apple KNEW this was coming out at least 3 months ago minimum, yet still continued to sell it knowing it was to be DISCONTINUED... sleazy tactics,, more to come ...
    Apple has jumped the shark -- look it up
    • A Nexus 7 for $149 would be a game changer

      These Apple moves could be too, but not in a positive way (your comment, for example). Since the Nexus 7 is supposed to be an excellent device, a price half that of an Apple mini would leave the minis on the shelf and lose legions of fans for Apple (and make some new ones for Android, no doubt).
      Schoolboy Bob
      • What about malware on Android

        What worries me about moving to Android is malware. The rise is about 400%. And I don't want to buy virus software as that defeats the object of buying the cheaper tablet.
        • if you have urge to run random programs which purpose u you dont even know

          to do things you do not understand, you need to consider getting medical treatment ASAP
          • Based on a recent study

            there were, IIRC, 175,000 downloads of malware laden apps from Google Play that were listed in the top 150 apps. I do agree that common sense is the best protection but based on what I read it's more of an issue that you would like to let on.
        • What malware?

          You research before you install something, you don't go to phishy websites (see what i did there?), and the malware issue is basically non-existent for you. It's way overblown (just like it is for other platforms as well), unless you refuse to adopt some reasonable habits.
          • absolutely

            ..And phishing sites are device independent. Doesn't matter if it's Apple, Microsoft or Google's.
        • @marcandsebe

          I have an Android device. Have for years. I use Lookout on it. I am a heavy user and have NEVER gotten a virus or if I have I have yet to experience ANY issues from it. Also, the Nexus uses JB the latest version of Android. Google is moving, albeit slowy, towards a more locked-down version of its mobile OS.

          The other things is: malware is targeted at the largest group; right now that is Android usuers (globally). iOS has seen attacks as well but it has a smaller (global) user base so it makes for a smaller target.

          For all the FUD (fear, uncertainty, doubt) about the security or lack of with Android, and considering the MILLIONS of users, I have yet to see any truly horrifying tales about Android malware attacks.

          Yes, yes all the big, mean tech companies share your data, nothing is private in the digital space, Big Brother is coming and yet we all still buy devices in droves and continue to put more and more of ourselves in the cloud.

          Eductate yourself, take precautions, don't live in fear. Life goes on. :)
        • Malware problem overblown

          There are some apps that make it into Google Play that are malware. But the great majority come from installing from unknown sources. By default, Android will not let you install from unknown sources. That includes Amazon's apps store (assuming you're not using a Kindle Fire variant).
        • Smoke and rumours about viruses on android

          I have used android for nearly two years now and have yet to see any sign of a virus infection. As long as you get your apps through either google play or someone like Amazon - As for anti virus there are excellent anti virus apps 90% of which are completely free. I use Avast anti virus on my phone and PC - but I doubt if it is totally necessary on a phone or tablet (which explains why they are free) All of the ones it catches on my PC are false positives simply because a piece of software is processing something in a way that is a little out of norm.
          Apple like to play on not having virus problems, not totally true on the macs, but the reality is that virus makers tend to target the biggest operating systems.
          With effective back up viruses are not really a problem - I have my PC set up so that I can restore it from a clean image file in a few hours if ever get a serious virus.
        • Get Real

          Malware isn't some anyone has to worry about on Android as 99/9% of people with a Android phone never has seen this happen.

          Now if you like to download from other sites other the Google Play, ur at your own risk. Malware is just crap that Bloggers like top talk about because most are Apple luvn fanbois
          Samuel Rodrigues
        • Here it comes...

          Once we get through the functionality gaps, performance gaps, number of apps gaps, camera gaps, retina display gaps, and "oh, it's just cooler" gaps all we are left with is FUD (Fear, Uncertainty, and Doubt for those who don't get it).

          Apple was the absolute king of the tablet market. The devices did more, performed better, had more apps, and had the better display...but that's the point "had". Get past the FUD of malware and instability and the playing field is pretty darn even in the Fall of 2012.
      • If Android is so

        Obviously superior that just using it converts you away from Apple, then there would be no need to drop the price to get people to buy it.
        • Apple Margins

          How do you think Apple's shareprice got so high? Premium prices (as in over charging for the tech).

          Google isn't necessarily "lowering" its price so much as Apple raises its. Just like this article said: they went with margins at the risk of alienating customers because they can AFFORD to. This is about margins and shareholders. Apple is under intense scrutiny and pressure to maintain the justification of its shareprice. Why do you think the company never puts anyting on sale?

          Also, Google makes over 90% or its revenue from display ads just as Amazon is a wares and digital content provider. Both are spaces of higher margins (unless you are Apple) than the normally low margin hardware business (why do think IBM sold its PC business to Lenovo?).

          Amazon and Google have no intention of generating a meaningful renvue stream from hardware sales. Google is positioning itself quite solidly for the inevitable monetization of mobile display ads.

          Hmm, I need to scoop up some more shares....:)
        • you're right

          But making an affordable tablet even more affordable is not a bad thing. Nexus 7 was due for a price shift, especially for their new 10" ipad killer on its way.
        • You something drastic to overcome the brainwashing

          Something to get iUsers out of the Apple Reality Distortion Field that's been reenforced for years, if not decades.
          • Ooo look...

            Three little trolls all in a row
            Plenty to say
            But nowhere to go
    • So they were meant to withdraw all ipads from sale

      or just the 3? Much as defending apple hurts, your comment borders on the bizarre. Name any other mainstream company that withdraws products from sale as soon as they start developing an upgrade.
      Little Old Man
      • How about the Osborne?

        oh ... wait they didn't withdraw it on purpose did they?
      • The Model T

        How about Ford with the Model T.