Apple iPad mini: Winners and losers

Summary:Apple announced the iPad mini. The petite 7.9-inch tablet will likely heavily disrupt the already-established tablet market more so than the original iPad. Who will gain and lose out from Tuesday's event?

The iPad mini is a secret no more -- not that it was much of a secret in the first place.

Despite leak after leak dribbled from the tap of the technology media, the long-awaited 7-inch tablet was formally revealed yesterday on the world's stage. But the decisions Apple made surrounding the iPad mini -- not necessarily relating to the feature set of the device itself, and in spite of the vast array of new hardware offered by the technology super-giant -- many were left angry.

Apple's share price dropped significantly after the event, and Google was left red-faced after the world tuned in to a platform super-giant standoff. 

Debuted on Tuesday, the petite iPad mini comes in a bevy of different versions. With only a selection of two colors -- black and white -- the pint-sized tablet comes in the usual 16GB, 32GB and 64GB editions with either Wi-Fi only, or Wi-Fi with 4G LTE connectivity. Using the same LTE hardware specification as the iPhone 5, Apple is manufacturing a range of devices to work across the four major LTE-enabled continents.

More iPad mini coverage: All ZDNet coverage | All CNET coverage | Techmeme | Apple statement

Apple's bid to push into the 7-inch range tablet space will likely spark a massive panic among its rivals, but the news wasn't entirely unexpected. Apple has no doubt raised the bar on the smaller tablet market, but the effects will not be seen this side of the year. Only during the coming fourth or first quarter will we see the impact (or damage) the iPad mini has had on the market.

Apple's announcement on Tuesday may disrupt the market as much as its own profit margins. How the technology giant will pull this off and still generate a profit out of the smaller tablet business -- including its 'original' iPad business -- remains unclear. It's worth taking a look at the winners and losers. 

Winners

Apple: The Cupertino, CA.-based technology giant is without doubt the major winner of the event, it goes almost without saying.

Even some die-hard Apple analysts were sketchy at the long-awaited device and how it would fare against the vast array of existing 7-inch devices on the market. What probably sets it apart is not the screen resolution as it lacks the popular high-resolution Retina display, and not necessarily the size of the device, despite its clear aesthetic appeal. Weight and extreme thinness aside, the device contains 4G LTE connectivity, something ruled out by sources in previous reporting.

But Apple has yet another point of order in the chain of competitive command as it takes on a niche market previously held by Apple's arch rivals, notably manufacturers of Android tablets, such as Samsung, Google, and Amazon, which all have 7-inch devices on the market. 

Apple's brand value alone can sell this tablet, even if there isn't much of a point in buying one. Prospective smaller-tablet buyers have held back for this announcement, and because of the premium added on top of the manufacturing cost of the device -- the profit margin to the likes of you and I -- Cupertino looks like it enjoy a knock-out quarter in the run up to the holiday season.

The education market: Education was mentioned here and there during Tuesday's hardware announcements. It wasn't the filler in the sandwich of the event, but there was a special focus on K-12 students in particular.

The low-priced tablet -- at least for an Apple product -- along with a new version of iBooks, Apple stressed the importance that the iPad is having on the education market. "We have been very aggressive in the [K-12] space, and I don€™t see that changing in terms of competition. €œWe'€™ve all seen hundreds of tablets come to market over the last few years, and I have yet to see any of them really gain what I would call any level of traction at all," said Apple chief executive Tim Cook during the event .

ZDNet editor Andrew Nusca notes that Apple's third quarter was its second consecutive in which the education market bought twice as many iPads as Macs, signalling an educational shift towards the post-PC device. "It's not a zero-sum game in terms of use cases, and there are parts of the market that have yet to be addressed by Apple's product," he observed .

Losers

Apple: Despite its record iPad sales and its massive majority of the tablet market share, the iPad mini has just thrown a whole can of whoop-ass on its existing tablet range. 

We know already that Apple's iPad has started to cannibalize PC sales. During the media event, Cook noted that over the past six years, the growth of the Mac has surpassed that of the PC market. He also noted that there were more iPads sold than any other PC manufacturer during the second quarter . The iPad is clearly a popular device, that's a given fact.

But the iPad 2 "died" yesterday when the iPad mini was announced, Business Insider claims. While the iPad 2 will remain on sale for the near future, the iPad mini will likely take its place when the iPad 2 is discontinued. It's only $70 less than the iPad 2, and with the range of features present on the iPad mini missing in the iPad 2, it's almost a no-brainer that one would buy the larger iPad 2 over its smaller sibling.

What's that going to do to Apple's profit margins? A huge amount. Despite the price premium put on the iPad mini, compared to its Samsung, Google, and Amazon's tablets, the iPad mini will likely make less money than the iPad 2 or the new iPad 4 (fourth-generation improved iPad with Retina display, announced yesterday). Apple must hope that it will generate enough sales of the iPad mini to surpass that of the iPad 2 in order to break through the amount it would have generated otherwise.

Piper Jaffray analyst Gene Munster, who specializes in Apple, told AllThingsD: We believe that the smaller iPad could cannibalize one million regular iPad units in December or a rate of cannibalization at 20 percent. [So] for every five million smaller iPads, you lose one million standard iPads."

Enterprise: The move to dish out a smaller iPad was a money grab, and little more . The device is not revolutionary or special. It's a pitch to the education market and end-consumers, but it was not given a 'point' by Apple executives. It was a push by Apple to compete in a space that the firm had fallen behind in.

As mentioned yesterday in the post-event analysis , the point of the device was to expand the reach of the money-making content on the firm's back-end services rather than the tablet itself. There were no concessions for the enterprise. There wasn't an 8GB version for the sole use of sideloading enterprise applications, it was a consumer-focused stunt and nothing more. 

"The same storage sizes are a dead giveaway. When faced with the "enterprise problem" of offering a slimmed-down iPad mini for business use,  Apple would have had to go far lower than the $329 base model price  it was offering, perhaps to $299 to retain the pricing consistency. But as many have pointed out, this would price the device at the same price as the iPod touch -- a mini-version of the already slimmed down iPad mini. 

"What it's like to own an Apple product." Image: The Oatmeal.

Samsung, Google, Amazon: The maker of equally petite tablets, both Google and Amazon must be shaking in their boots, knowing full well that Apple will come along late to the game and chomp up their sales ahead of the Christmas rush. Samsung has less to worry about, however. Its tablets  never really took off in the first place , according to court documents. The Korean electronics giant sold only 1.4 million tablets worldwide since its range launched, compared to the 32 million iPads sold in the U.S. alone up to the second-quarter.

However, Google and Amazon are likely prepared for this. After all, Google makes just enough to cover its costs on its tablet business, and Amazon makes a loss on its Kindle devices.

iPad 3 owners: Despite there being four generations of the iPad, only three are now on sale. The original iPad is no longer on sale because it's old, clunky, and wasn't powerful enough to run the latest version of iOS, Apple's mobile operating system for the platform.

However, some are wondering exactly how the iPad 3 fits into the mix. The truth is: it doesn't.

Branded "the new iPad" when it was first released earlier this year, and dubbed the iPad 3 by everyone else other than Apple, it has now been discontinued in favor of the "iPad with Retina display," which the press is already dubbing the iPad 4. Why? It's the fourth-generation tablet.

The iPad 4 is all but exactly the same as the iPad 3 except it has a beefed up processor, more RAM memory, and runs faster. 

Where does that leave the iPad 3? On the scrapheap, only seven months after dishing out the Retina display tablet.

CNET's Roger Cheng has more on the frustration of owning a now-discontinued iPad 3. The tablet will still be supported and likely feature the next-generation iOS 7 mobile operating system, but a lot of people are angry that they've shelled out $499 for the base model and less than a year later their tablet is already replaced by a better model. Not a cool move, Apple. 

However, Apple has actually simplified the line-up considerably, but our 'normal' naming convention dictates that we have the iPad mini, the iPad 2, and the iPad 4 with a Retina display. "Which iPad do you have?" says one. "The one with the better display," says the other. Simple. 

Simple, right? It is when Apple puts it like that, but even Tim Cook was tripping up over his own words on Tuesday when he was trying to remember how many iPads there were, which ones still existed, and which ones had fallen behind. If the chief executive is stumbling over the iPad, there's little hope for the rest of us.

Image credit: James Martin/CNET.

Topics: Apple, Amazon, Android, Google, iOS, iPad, Tablets, Tech Industry

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.