The blogosphere is humming with a new idea that Apple (NASDAQ:AAPL) is planning to come out with a iPad ‘Mini’ sometime next year to fend off competition from Amazon’s (NASDAQ:AMZN) Kindle Fire. [1] Initial reports say that ‘mini’ is not a reference to the size but the cost of the new iPad, which will be tentatively priced in a $250-$300 range. While the veracity of these claims is still unknown, it does seem the record sales of Kindle Fire have caught Apple’s eye.
While the Kindle Fire may not be a direct competitor to Apple’s iPad because of the design issues with its 7-inch size, its sales have shown that there is a market for the lower end tablets. We believe this has led Apple to adjust its strategy and consider launching a cheaper device to keep Amazon at bay. Since Apple believes that 10 inch tablets are the way to go, we do not think they will compromise on the size of the screen but rather go with cheaper hardware and fewer features to bring the price down. This would be very un-Apple like so we want to see more evidence before we think about the potential impact or adjust our estimates.
Amazon is currently taking a margin hit on Kindle Fire as it plans to make up for the same by promoting the larger goal of increasing sale of merchandise on its online stores. Since Apple doesn’t have the same luxury, it will be interesting to see how Apple manages to protect its margins, should it roll out iPad Mini next year.
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Notes:- iPad Mini” to take on Kindle Fire?, CNet, October 12th, 2011 [↩]
