Apple iPad
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The new iPad is contending with a cheaper rival: the old iPad.
Apple unveiled its next-generation iPad yesterday and reduced the price of the iPad 2, introducing a lower-cost tablet as it feels the pressure of cheaper rivals such as Amazon’s Kindle Fire.
“Apple is always saying it’s not seeing any impact from the Kindle Fire, but why are they offering a lower-priced model?” said Colin Gillis, an analyst with BGC Partners. “They felt the need to move down the cost curve.”
The firm’s latest iPad offers a higher-resolution screen and the potential for faster download speeds through wireless 4G networks, but it does not represent a major evolution from its predecessor, a strategy similar to when it introduced the iPhone 4S after the iPhone 4.
In both cases the incoming products paved the way for Apple to slash prices of older models, allowing it to compete for lower-end customers who have felt priced out of the company’s hot gadgets.
A lot has changed in the tablet market since the iPad 2 launched last year, when rivals posed little threat with tablets that in some cases cost more than Apple’s iPad.
Then Amazon introduced the Kindle Fire at $200, undercutting the iPad’s starting price tag of $499. The new iPad will still sell at that price, but the iPad 2 is retailing at $399.
Last year at this time, Apple had been competing with expensive rivals such as the Motorola Xoom and the BlackBerry PlayBook. Now Google is getting in on the act, with a tablet expected later this year for around $200, according to Tony Berkman, an analyst with ITG.
“There will be a whole bunch of tablets in the $200 range,” Berkman said. “That’s tremendous value.”
This strategy for tablets is tracking Apple’s smartphone sales history, in which competitors began staking positions along the lower price points, beating the iPhone’s $199 starter price. A scaled-down iPhone 4 now sells for $100 alongside the higher-end iPhone 4S.
The iPhone 4 accounts for one-third of all US iPhone sales, according to Berkman, and the iPad 2 is likely to represent a similar portion of total iPad sales.
“By taking older products and moving price points down, Apple has had a lot of success,” BGC Partners’ Gillis said.
Ultimately consumers may be drawn to the lower-cost iPad 2 if the new gadget’s features don’t make up for the cost, analysts said.
Still, the latest model is set to be a hit. Apple is expected to sell 60 million iPads this year, and still hold on to more than 50 percent of the tablet market, according to analysts.