Apple's $60M trademark deal opens way for iPad Mini in China, says analyst

Size and price point matters in mainland China, says expert, who sees a 7-in. iPad as Apple's killer tablet for the Asian market

The $60 million Apple paid to a little-known firm for the iPad trademark will let the Cupertino, Calif. company not only start selling its newest tablet there, but also lays the groundwork for an expected smaller iPad this fall, a financial analyst said today.

Earlier Monday, a Chinese court said that the dispute between Apple and Proview, a Chinese PC and display vendor that faces bankruptcy, had been resolved when Apple paid Proview $60 million for the "iPad" trademark in the People's Republic of China (PRC), or mainland China.

The companies had been locked in a legal battle since late 2011. Apple contended it had purchased the trademark rights in 2009, but Proview convinced several courts in the PRC otherwise, resulting in Apple's iPad 2, the tablet introduced in the U.S. in March 2011 and in China later that year, being pulled from some store shelves.

Apple has not rolled out the new iPad, the improved model launched four months ago, in the PRC, although it has sold the tablet in Hong Kong and Taiwan, two other markets the company includes in its "Greater China" sales region.

With the Proview problem behind it, Apple can now start selling the new iPad in mainland China, said Brian White, an analyst with Topeka Capital Markets, in a Monday note to clients.

"Today's iPad settlement is important and opens up the sale of the new iPad," wrote White, who also noted that Apple had received clearance from the PRC's Telecommunications Equipment Certification Center in late May.

"The new iPad was supposed to launch in the June quarter," said White in a follow-up interview Monday, referring to the three-month period that ended Saturday, June 30.

Sales of the new iPad will now start in the third calendar quarter, the current period, said White.

He doesn't expect that the delay will impact sales overall in the PRC. Instead, iPads that would have been sold last quarter -- if Apple had not run into Proview and the Chinese courts -- will be this quarter.

Or in some cases, those iPads have already been sold.

Several weeks ago, Apple removed its two-iPads-per-customer restriction in Hong Kong, a move that White read as prompted by heavy demand from customers in the PRC. "Many Apple products make their way over to the mainland [from Hong Kong]," White said.

Even more important to sales in the PRC, said White, is that the end of the trademark ruckus means Apple will be able to unveil a smaller iPad on the mainland later this year.

"We believe the launch of an iPad Mini -- we expect September -- will prove very popular in China," said White, who was one of the analysts to first latch onto the idea that Apple would finally produce a so-called "iPad Mini" with a smaller screen, most likely one sized between 7 and 8 inches. The current iPad sports a 10.7-in. display.

"Ultimately, that's the iPad that will sell in mainland China," said White, who during his quarterly trips to Asia sees many more 7-in. non-Apple tablets than the larger iPads. "It's not just the form factor, but also the price point [of an iPad Mini]."

Most analysts who buy into the idea of a small iPad, including White, believe it will be priced between $250 and $300. That range fits nicely into Apple's existing iPad pricing structure, which starts at $399 for last year's iPad 2 and $499 for this year's model.

Andy Hargreaves of Pacific Crest, for example, issued a note to client (download PDF) last Thursday that predicted a $299 8GB 7.85-in. iPad Mini would debut in October. He estimated that Apple could sell 10 million of the smaller tablets in the year's final quarter, and 35.2 million in Apple's fiscal year 2013, which runs from Oct. 1, 2012 to Sept. 30, 2013.

A good portion of those smaller tablets would end up in Chinese hands, White said, pointing out the importance Apple places on its Greater China region of the PRC, Hong Kong and Taiwan.

The area was responsible for $7.9 billion in sales, or 20% of Apple's total, for the quarter that ended March 31, a tripling from the same quarter the year before.

"Apple is catering to the Asian market," said White, because of the sales opportunities there, as he cited a list of moves the company has made, including more China-specific features in the upcoming OS X Mountain Lion, due to launch this month, and the addition of Chinese support to iOS' Siri voice-activated assistant in the pending iOS 6, likely to be released this fall.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

Read more about mobile and wireless in Computerworld's Mobile and Wireless Topic Center.

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Gregg Keizer

Computerworld (US)

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