Apple today, in addition to unveiling its latest iPad, announced that it has lowered the price of the iPad 2, which now starts at $399 for the 16GB Wi-Fi model--a $100 reduction from its previous price.
The iPad 2 price cut, while not unexpected, is a little less aggressive than what many armchair pundits--myself included--had anticipated.
With its $199 Kindle Fire selling well, Amazon has proven there's sizable consumer demand for a low-end, 7-inch color tablet. Last month, in fact, research firm IHS iSuppli reported that Amazon shipped 3.9 million Kindle Fires in the fourth quarter of 2001, enough to snare 14.3 percent of the global tablet market.
As a result, many industry watchers assumed Apple would price the iPad 2 very aggressively--perhaps as low as $299--to offer tablet shoppers an Apple-branded alternative to the Kindle Fire.
The 7-Inch Solution
So is Apple willing to cede the 7-inch tablet market to the likes of Amazon, Barnes & Noble (maker of the Nook Color and Nook Tablet), and Samsung (Galaxy Tab)? It seems unlikely, particularly when the iPad still dominates the market for larger slates.
One persistent rumor suggests Apple is developing an "iPad Mini," a 7-inch device designed to compete head-on with the Kindle Fire and the rest of the petite pack. If true, it's possible that Apple is preserving the $299 price point for its 7-inch slate--$100 more than the Fire.
The addition of an iPad Mini could further Apple's tablet dominance. With iPad models starting at $299, $399, and $499, Apple would compete in three segments of the rapidly expanding tablet market: 7-inch; bargain 10-inch; and premium 10-inch.