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John Morris & Sean Portnoy

With iPad 3 launch, will Apple drop lowest iPad 2 price to $299 -- or lower?

By | January 3, 2012, 4:39am PST

Summary: The iPad 3 rumor mill is churning furiously now, but what will be the fate of the iPad 2 when Apple’s latest tablet inevitably drops? The first-generation iPad got a $100 price cut until units ran out when the iPad 2 was released, but that was when there was basically no competition for the Apple tablets. [...]

The iPad 3 rumor mill is churning furiously now, but what will be the fate of the iPad 2 when Apple’s latest tablet inevitably drops?

The first-generation iPad got a $100 price cut until units ran out when the iPad 2 was released, but that was when there was basically no competition for the Apple tablets. Now at least the Kindle Fire with its $199 price tag is selling in the millions, and Amazon promises a new version soon.

Apple could make a couple of moves to blunt the Kindle Fire’s growth. According to DigiTimes, there may be two different flavors of iPad 3 — a higher-end model with “retina display” and a lower-tier one with a similar display to the iPad 2. It’s certainly possible that the version with the higher-resolution screen will be priced at $499, with the other model starting at $399. But the price difference between $199 and $399 is still steep, so Apple could then drop the iPad 2 price to $299 to fill in that gap. At this point, there are plenty of people who won’t need the iPad 3’s new bells and whistles and could gladly scoop up a iPad 2 for $299.

But would Apple get even more aggressive? After all, the iPad 2 supply could be limited, and once they’re gone, then its cheapest slate would only be $399, which more Android tablet makers can match (like the Sony Tablet S). Could the company drop the iPad 2 price all the way to $199 to match the Kindle Fire and then charge $299 for the new entry-level iPad 3?

As smartphone competition heated up, Apple was aggressive in slashing prices for its iPhones. Do you think it will be equally aggressive with its iPad pricing in 2012? Let us know your thoughts in the Talkback section.

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Sean Portnoy is a freelance technology journalist.

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Sean Portnoy

Sean Portnoy is a freelance technology journalist; currently, all work that Sean does is on a contractural basis. Sean has also written corporate communications documents for CA.

Sean does not accept gifts from companies he covers. All hardware products he writes about are purchased with his own funds or are review units covered under formal loan agreements and are returned after the review is complete.

Biography

Sean Portnoy

Sean Portnoy started his tech writing career at ZDNet nearly a decade ago. He then spent several years as an editor at Computer Shopper magazine, most recently serving as online executive editor. He received a B.A. from Brown University and an M.A. from the University of Southern California.
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RE: With iPad 3 launch, will Apple drop lowest iPad 2 price to $299 -- or lower?
SincerelyHis 16th Jan
@marbo100 Wow! The iPad 3 has me really excited, can't wait til it comes out! I just read the leaked feature list and full specifications for the new iPad, and I must say they're pretty amazing.

If you guys want to check out the leaked iPad 3 information, just check the link below -

http://ipad3leak.com.nu
Unless one of those iPads is a 7" model I don't see any reason to get it.
@marbo100 Wow! The iPad 3 has me really excited, can't wait til it comes out! I just read the leaked feature list and full specifications for the new iPad, and I must say they're pretty amazing.

If you guys want to check out the leaked iPad 3 information, just check the link below -

http://ipad3leak.com.nu
the horse is out of the barn. there is no profitable competition. salvation for the competitors will happen if they can out-innovate Apple ( a tall order!) but this market belongs to Apple for the next 2-3 years, I think. meantime, the shift undermines the desktop and other markets in unpredictable ways we can only see after they happen. interesting period we are in, no?
@macgregor@... Out-innovate? What can the iPad do that the others cannot? There are more varieties in style and power outside of Apple. And they can all do Flash (yeah, cheap shot). Apple doesn't even want to do colors like they did long ago. Apple has two things keep it selling: 1) mass MASS marketing, which is where your money goes when you buy an iProduct; and 2) the Cult of Jobs, who singlehandedly made followers believe his products were the end-all-be-all of computing. Both of these things are not sustainable indefinitely.
@myangeldust You got to be kidding. iPad has an undeniable software and ecosystem advantage, at the very least. Androids don't even have gyros or position sensors, etc??? necessarily (Kindle fire, etc???)

All that Android 'tablets' can do is COPY the iPad, badly. And yeah, Apple has ALL the innovation here. This is not to say they discovered all the principles that go into an iPad (the 'tablet' that was finally done right, that eclipsed literally every other 'tablet' that had ever come before--and all of which flopped miserably).

Get your facts straight, or maybe lay off the dust for awhile.

Varieties get you NOTHING. All that variety, and it all runs under ONE horribly fragmented rip-off of an OS that is trying to be like iOS, but leaving out the developer environment, APIs, etc??? LOL
@myangeldust
You forgot possibly the most important aspect of all - ease of use. My wife and her brothers wanted a tablet for their mother for Christmas, but thought the iPad was too expensive. Lucked into a deal on a Lenovo K1 for $239 when the store was closing them out. Got it home, and it worked fine...but nothing was intuitive. No clear way to close apps, without going into the setting menu and using the app manager. Tried downloading pictures and video clips from facebook...no option to 'save', just share, post, etc. After a week of trying to get things configured, we knew there was no way that my mother-in-law would attempt to use it, so it would be a waste of money to give it to her. Bit the bullet, spent another $250 for the iPad2, and she has been using it non-stop.

Yes, I know that I could have eventually got things working the way I wanted, but the beauty of tablets was that they simplify using a computer...and after a week I know which choice I'd make if I were shopping for a tablet.
@myangeldust So based on your post your idea of innovation is using colors and Flash. I hope you don't run a company and have people reliant on your for their livelihood. As far as your two things that keep Apple selling, those are common talking point responses used by somebody with no facts to back up their hatred. By the way, marketing only gets you so far and the iDevices have all gone well beyond that point. It's customer satisfaction that keeps the sales going.
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Are your dreaming? I have never seen Apple drop a price so low. I bought a iPad 1 when the iPad 2 came out. It was $350 I believe for a short time on the refurb side of the Apple store. But it never lasted too long then it was back up to $399. I think Apple is very goos at inventory control. I doubt unless they had a really bad holiday sales season that they have a lot of iPad 2's to get rid of. If indeed a iPad 3 is just around the corner.
@dveed@??? Personally, I doubt it. But they have all the money to do it if they want to really put a hurt on the copy cats like Android, Samsung, etc??? Something tells me that Apple could also do a loss-leader. Just because they have never had to do it before, doesn't mean that they won't do it here. The iPad market is kinda important (and it's not a 'tablet' market at all, yet.)
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Posted in wrong place
A Grain of Salt Updated - 3rd Jan
.
Whenever Apple releases a new version of a device, the new version comes out at the same price as the old but with enhancements (new features, more storage, higher resolution, etc.).

Apple does not care to compete with low-margin, high-volume competitors. Why should they? Whey they decide to announce a new product, they will wait until their inventory on the old version is low enough to absorb the loss and then they will offer a modest price-cut (such as the $100 price-cut mentioned above) but they will not try to steal market share from Amazon, or anyone else selling on razor-thin margins. In the end, Apple does not leave money on the table in order to improve market share. That is a no-win scenario for Apple and Steve Jobs knew that. It remains to be seen whether Tim Cook understands that or not, but if he doesn't, we will be initiating a long, slow, downward spiral for Apple.
There may not be a single manufacturer selling as many tablets as Apple, however collectively Android Tablets are putting quite a dent in Apple??s potential sales. Just like the old days when Apple compared sales to IBM and the market was a whole lot more than IBM, now the Android market is a lot bigger than Samsung. Apple must compete. It is because of this pricing that Apple with their great OSs and ??think Different??attitude has never been the real winner an any market. Maybe they hope to change this by offering a low end tablet that can offer an alternative with 200 dollar android tablets. The iPads are nice however there again there is the fact that few good free apps exist for IOS as on Android, and especially in this day and age, price is an impoortant consideration.
@markosjal@... I think, as in everything else, it will come down to "Do I want to save up for the mystique of an iPad?" or "Do I want an affordable tablet that works for me?" The Android tablets have shown some interesting OS screens on affordable hardware.
@myangeldust Just because you are willing to settle for a non-iPad iPad, doesn't mean any appreciable number of other people will. So far, they haven't really.

I think this is the case with Androids in general. Lots of people buying them, but not many apps being sold, not much internet usage. I guess there is social pressure either to have an iPad/iPhone, -OR- to somehow try to prove to everyone that there is a credible alternative (even though there really isn't).
... Apple doesn't care about market share. Apple has to have $499 for their baseline tablet, just as they have to have $999 for their baseline MacBook. They must be profitable and they do not have the capacity to trim their margins and make it up on volume.

Amazon can sell the Kindle Fire at a loss because they can make it up on subscriptions to Amazon Prime. Apple has no such luxury

In the end, there may be lots of pent-up demand for $100-$200 tablets (as evidenced by the HP TouchPad fire-sale and the success of the Kindle Fire) but Apple cannot afford to compete at those price-points.
@markosjal@... Somebody has been sharing their angel dust with you haven't they wink
If you weren't sitting at your computer, ready to order, when the new price was announced you would be out of luck. An iPad is far superior to a Kindle. In my mind they can't even be compared. If iPad were to be priced anywhere near Kindles, the sale of Kindles would likely halt.
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Why Apple has no incentive to cut prices
Speednet Updated - 3rd Jan
I don't think Apple will drastically slash prices on iPad 2 or the new iPad 3. In fact, my guess is that they'll establish a new higher base price point for the iPad 3, and maybe lower the price on iPad 2 a little.

The reason is that the way the tablet "wars" are looking, the competition is not all about the hardware. In fact, it's mostly about the software. Particularly the OS.

As an owner of both an Android tablet and an iPad, I can say the available apps are mainly similar. In fact, Android gets a slight edge for having better multi-tasking.

However, the Android tablet is nearly unusable for basic Web browsing when compared to the iPad 2. It is a painful experience, as the display constantly stutters and blanks out as you try to do something as basic as scrolling. Pages appear buggy and distorted as the display attempts to juxtapose Flash ads and content next to regular HTML content.

Since a large amount of tablet usage (perhaps the majority of usage) is simple Web browsing, the iPad crushes Android tablets most of the time.

From what I have read, the problems boil down to some fundamental flaws in the way Android treats the priority of display updates in the OS. Rather than giving hardware acceleration priority when the user scrolls, Android keeps updating background stuff, even as the user attempts to scroll the page. The result is that the content of the page updates in real-time on Android -- but at the expense of a painfully jittery and glitchy browsing experience.

There is also one particular hardware issue that all Android tablets seem to share, and that's the display ratio. The iPad's 4:3 screen ratio is just perfect for a great portrait or landscape orientation, but Android's typical 16:9 screen ratio is uncomfortably narrow in portrait mode, which is how the best Web browsing is done on a tablet. Even if you switch to landscape, the tablet display becomes too wide and short for optimum Web browsing.

I have no idea why Android device makers refuse to use a 4:3 ratio, other than the fact that it is cheaper to use more plentiful 16:9 displays.

Incidentally, the other tablet I have is an HP TouchPad, which uses a 4:3 ratio, and it does make a better Web browsing tablet than the Android tablet. When you factor in the ability to easily overclock the TouchPad processor using PreWare, the TouchPad makes for a MUCH better browsing experience than the Android.
@Speednet You are absolutely correct!
@Speednet Finally a fair and balanced review by someone who actually has used all three platforms. As an iPad early adoptee, and a former Apple corporate employee, I may be biased in the direction of Apple, but I'm always willing to try new technology. There will always be a market for Kia's just as there will always be a market for Ferrari's. It just depends what you value more, cheap and mass or sleek and well engineered.
There will not be two different iPad 3's. By doing so, Would be implying one is inferior to the other one, and if you have paid attention in the last 5 years, Apple does not do that.

There will be an iPad 3 starting at $499 and the iPad 2 at $399. We have been through this already. Don't believe the hype! Other wise you might find yourself waiting on an iPhone 5 to drop. LoL
An iPod Touch 4 can be had for $199 - so with a larger (maybe 7"?) cheaper to make display - iPad-Lite could sell for that price and ipad3 could sell for $799 for elitist envy with ipad2 staying right where is.
@oneStarman That's an iTouch 4 with a paltry 8GB of storage, single core A4 processor with 256MB of RAM, and a non-IPS 3.5 inch Retina display.

The 32 GB version would have to drop to $150 before we see a new $200 iPad, even one with 8GB of storage. Case closed.
@oneStarman ... it seems to me that an 7" iPod Touch is more likely than a 7" iPad 3 - even if they are essentially the same device.
@mwagner@... Considering your bias against Apple I am not sure why anybody would care what anything Apple related "seems" to you.
Why do crap journalists keep comparing $199 Kindle Fire to $499 or $399 iPads? It's like Apples & Oranges
I don't see it happening, not when they charge $699 for an iPad they aren't going to shave $400 off the price.
I love how many pundits think they know better how to run Apple than Apple does.

Query: You are selling Porsches. You are making Lots of money. Your market cap makes you either the first or second most valuable company in the world. You can't make products fast enough. You sell every car you make, immediately after they are made - and The Porsche 911GT4 r/s I want costs $100,000+, compared to the top of GM's line - the Corvette.

Everybody else is selling POS GM vehicles..

The Chevy dealer is running around telling everyone that Porsche is going to have introduce a Porsche Chevette,* (if you are too young to know what a Chevette is, look it up; also, see Pontiac T100; look in dictionary for 'piece of crap domestic attempt to beat the Toyota Corrolla' you will see their pictures), to compete with Chevy. Because after all, Chevy makes 20, (I don't know the exact no.), different models and you can buy parts in junk yards from Mumbai and to Cleveland and 'new parts' from a dozen cheap, mostly inferior or counterfeit parts manufacturers. So, Chevy is 'open source'.

Believing there might be a way to pickup some of Porsche's 'closed source' business, GM intro's even more pieces of junk - the Pontiac Fiero 2M4' (which was built from the T100 parts bin with a plastic body); then the Pontiac Solstice. Toyota obliterated the Fiero with the MR2. And, thankfully, GM killed the Solstice before it embarrassed them anymore.

Apple is Porsche. They do one thing and one thing well. Build really good and really fast cars. They don't compromise and they don't sit around trying to unthrone GM, the cheap car manufacturer, by building a cheap car. As small as Porsche's market is, they are raking money in, hand over fist. Likewise, Apple does one thing very good. Look in the dictionary under : insanely great products and you'll see the Apple logo and a black faux turtle neck. Meanwhile Android headsets are being given away as fast as they can be made.

Android is is GM. They make thousands of different handsets, like GM makes hundreds of different cars. Users chant 'But, they are open source!' hoping that will cover up the fact 'open source' in this case means twenty different interpretations of a questionable OS.

And Apple is going to drop the price of the iPad2 to compete with... ...with themselves?

Here is the deal - you drive your 'open source' Android Chevette. From junk yard to junk yard to pick up an app here and another one there.

And I'll drive my Apple 911 GT4 r/s. in Porsche's/Apple's 'closed source' ecosystem. Confident in knowing Porsche/Apple isn't going to lower themselves to compete in the junk market.

Apple runs a 'just in time' inventory system. When the iPad3 hits the shelves, Apple will have very limited inventory of 2's. They will sell what they have of 2's for a $100 less than the 3's.

The Android market resembles the market for Osbourne Computers, (another lookup). Phenomenal computers announced and never shipped. Instead, they went broke trying to kludge the machines they had in inventory so they could sell it.

*Mercedes tried this with the 190 Class. A complete flop.
@mtdoonmeister
Well said overall
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Speculation is pointless
symbolset 3rd Jan
Apple will tell us what they're going to do when they do it. And it will be a surprise. That's how they operate.
I have to agree with most of what Speednet and mtdoonmeister have posted. I have both an Android tablet and an iPad. I have worked in the technology field for about 25 years and have played with many versions and flavors of DOS, Windows, MacOS, Novell, Palm and even a little Linux. When we got the Android tablet for our daughter for Christmas and I was loading apps on it before wrapping it, I felt there was quite a learning curve, considering I am fairly familiar with different types of technology. One huge frustration was that I could not access Google's Android Market Apps. Apparently the tablet vendor had a deal with Amazon. Since it is too late to return the tablet and it isn't a make or break flaw, we are living with that limitation, at least until I can learn a way around it. That said, will the average consumer be willing to spend the time I did to figure out why the tablet would not work with the Market? Will they want to hack the OS to tweak it to work the way they want? I am a computer consultant and when clients who have no experience with helping themselves learn hardware/software (and they don't want to gain the experience) ask me which tablet to get, I recommend an iPad, because I don't want to be 24/7 support for them. (I know, that would be business, but I need a life, too).
Until all the Android flavors can offer a unified look and function out of the box (even if that is not in the best interest of Android and opensource), the average Joe is going to buy iPad.
So, other than to clear inventory, I don't think Apple has much incentive to lower the price of iPad 2 or 3. There may be more of a reason to make a device between the size of the iTouch and iPad to compete with the eReaders. But that is a completely different discussion...
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$350 is the sweet spot
kingcobra23 3rd Jan
The iPad 2 is a steal at $150 more than the kindle as far as features/benefits go (and this is coming from an android guy). But Apple doesn't NEED to do anything about the Kindle, the iPad has the cool factor and it sells like crazy.
I've been a 20 + Microsoft user and loyal servant of upgrades. I even went as far as 3 Android tablets just because they were not Apple. I have relented and purchased two ipad2 for my wife and I. Why? Because, to my dismay, they work. The clunky androids never gave the satisfaction of handheld or mobile anything. Yes, they are selling wildly, but what about the user experience? Apple offers it and I accepted. There I said it and it doesn't feel so bad to like Apple!
iPad 3 with Retina Display at same price as current ipad 2.

ROFLMAO.

No-one does a panel with this.

@ 10", a Retina display iPad would be around 2,500 x 1900.

Let's get a 1080p iPad first, before flushing hundred's of dollars down the toilet on a yield poor tablet display no-one needs.

Dell do a nicde one of this rough resolution, but it is 30"

http://www.dell.com/content/topics/topic.aspx/global/products/monitors/topics/en/monitor_3007wfp?c=us&l=en&s=gen&~section=specs
How about a variant on this scenario? Apple releases a 4" iPod Touch for only $200, while dropping the iPad 2 price to $300.

Let's keep in mind as well that the iPhone 3GS is still around, and selling for $0 with 2-year contracts. So, Apple definitely has a track record of keeping older devices around-- 2 years old in fact. It could decide to do something similar with the iPad 2-- keeping it around at $300, then dropping it to $200 after another 6 months.

Is there any room in here for a 7" iPad? That could also upset all calculations. iPod Touch $150, iPad 2 $250, iPad 007 for $350, and iPad 3 for $450.

You know, there's an even easier way for Apple to do all this! Put out a wifi only, 8gb iPad 2 for $200!! That would be devastating to Kindle Fire. The 16gb could be $300. With 3G would be $400. Then the iPad 3 wifi only 16gb would be the classic $500 and the 32gb the classic $600, etc.

The key, long-term, is for Apple to hook people into its eco-system. It needs the low entry device on both the Mac front and the i-device front. Once snared, people will stay and upgrade. Long-term company viability is going to depend on that, especially with a global market likely to go Android after Symbian (see article elsewhere on the net).
Following Mac side rules the prices will not drop - "We're worth every dollar"
Following the iphone side the authors ideas might be close to reality.

BUT would be Apple buyers biggest problem is.... Apple Product Worshipers
They will trash talk anyone who disses any Apple product, they buy the latest and greatest products eagerly even if that means waiting in lines for the newest Apple toy. (Of course they get support and comfort in those lines from other Apple worshipers.)
In reality there are those who are slaves to anything Apple and there are the rest of us who's heads aren't up and locked in Apples A-- Well you know.
So regardless of what happens with pricing it's a lot like the media worship of Obama (Sorry but I couldn't resist the comparison) - The press including the 'honest broker' computer mag reviewers fawn over anything Apple foists off on the public and only later do they complain and that only lasts until Apple snaps their fingers making them all toe the line and worship the Apple again. Funny isn't it the idea of the Apple symbol and the similarity to an ancient event in the garden of eden. The crowd bites the apple and falls into the abyss of Apple worship.
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If I were Apple...
warboat 3rd Jan
I wouldn't launch iPad 3 until iPad 2 sales drop significantly.
Keep milking the iPad 2 cow while the milk flows.
Why bring out iPad 3 when the iPad 2 advertising campaign is still in full swing?
When Apple launches iPad 3, they want you all to buy it, not choose between it and the iPad 2. To offer iPad 2 as a competing choice at massive discount would be detrimental to optimising profit.
Sales 101: if you give customers less choice, the buying decision is made easier.
No. I have a first gen iPad. I would have preferred a gen 2 but oh well. Nothing but happiness here on my part. All I ever did with my pc was clean out crap from flash player. I used to go to questionable sites...meaning, would they send malicious stuff my way? I am a happy lazy average person. I am glad I paid the high price for the feel and use of a superior product. Ease of use, all apps pre reviewed for infection etc. would I pay for an iPad 3? No, my iPad 1 is excellent for my needs, but for every android tablet user that gets a bug or crappy app etc. there is one who will buy this awesome product. I have my laptop pc use it less and less.... I am wondering if I shall save my Money....since I have had to pay for it twice over in visits to 'cheap' repair places to clear bugs etc. do I go with a Mac air laptop or a desktop?.The 3 will be the way to go for all those fed up with viruses, etc. and android "macitation'. It is a compliement to Apple that imitation is a compliement but no substitution once the real thing is in hand and within price range. Most of us Mac and iPad users are just average folk who want superior product for our money. Sorry employees in China die over it, but I don't shop at slave-Wages for China Wal-mart on a daily basis either.
For the first time in a long time, I am thinking about an alternative to an Apple product. Because I see some real innovation out of ASUS in the "Transformer" line. What is holding me back? EVERY single time I bought something other than an Apple product I have either been disappointed or it was a TOTAL disaster.
Apple and their product have not let me down ONCE in more than 20 years. Well, I did buy the Newton...and loved it...but they stopped production exactly 1 week after I received it. Kept it, used it, loved it. But it was a PIA to get software and hardware for it.

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