$329, Apple? Really?

Everyone knew Apple's (Nasdaq: AAPL  ) iPad Mini was coming. The problem was going to be the pricing. As I wrote earlier this month:

There is no right price for the iPad Mini, and it will be Apple that pays the price for that unanswerable dilemma. If the iPad Mini is too cheap, the iPad suffers. If the iPad Mini is too expensive, no one will buy it. Skimping on features will make it dead on arrival. Loading too many of the features of its larger sibling will destroy the sibling's appeal.

That's pretty much where we are now with today's big reveal. At $329, it's too expensive to compete against the $199 devices that it was supposed to combat, yet it's also dangerously close to eating into what is probably the more profitable full-sized iPad on a unit basis.

For those scoring at home, let's take a look at the three cheapest models in the iPad Mini, iPad 2, and the new fourth-generation iPad lines. We're talking about $329, $399, and $499 price points, respectively, for the entry-level 16 gigabyte models.

The iPad Mini isn't simply the 9.7-inch iPad in a smaller 7.9-inch package. It lacks the crisp Retina Display graphics of the new iPad. It lacks the more powerful A6X chip. In terms of resolution and processing power, it's essentially the iPad 2 after shrinking in the wash. The dual-facing cameras are the higher quality ones found in the new iPad, but is that really enough of a difference-maker to someone choosing between $329 iPad Mini and the $399 iPad 2?

Now let's look at the Amazon.com's (Nasdaq: AMZN  ) Kindle Fire HD and Google's (Nasdaq: GOOG  ) Nexus 7.

There's a big difference between 7 inches and the iPad Mini at 7.9 inches diagonally. Apple's device covers 29.6 square inches of screen space, compared with just 21.9 square inches of real estate for the 7-inchers.

However, will that be enough to sway shoppers away from the $199 price point of the Kindle Fire HD or the Nexus 7? Probably not. The iPad Mini is going be a big seller, but it's going to come largely at the expense of Apple's pricier iPads.

By holding back on the specs so that the iPad Mini doesn't destroy the fourth-generation iPad this also opens the door for entry-level players to win the spec-sheet battle, too.

We'll find out in three months how this all plays out. Unlike way too many gadget makers, Apple is transparent enough to put out actual unit metrics on a quarterly basis.

Apple did one thing right, though. In updating its full-sized iPad now -- instead of the historical springtime refreshes -- it will create a more robust than usual demand for the company's tablets during the holiday quarter. In other words, it will seem -- on the surface, at least -- that Apple did the right thing by introducing the iPad Mini at its tricky price point.

We'll know better.

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Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Apple, Amazon.com, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 23, 2012, at 10:58 PM, FreeRange1 wrote:

    What nonsense! Where do you guys come up with this crap. The Kindles, and Nexus, are sold AT A LOSS!!!!!! And you get what you pay for - you get so much more with the iPad. Seriously, a little over $100 against a cheap plastic imitation, with very limited capabilities in comparison, is NOT a giant leap when you figure that it is going to be a device you are going to use everyday and which will last you for years. Especially compared to the competitive offerings when you look at the total ecosystem of hardware, OS that is easily updated, available software / apps and content.

  • Report this Comment On October 23, 2012, at 11:00 PM, mmoser105 wrote:

    Yes really Rick. Apple builds a great machine. You get what you pay for. What are you-short Apple?

  • Report this Comment On October 23, 2012, at 11:03 PM, 0gre wrote:

    This is sort of like suggesting people are going to buy the MacBook Pro Retina 13" rather than buying the 15". The products are pretty clearly differentiated and people are going to buy the one which best meets their needs. The difference in the price of the iPad and the Nexus 7 is $300, that's huge and compelling gap. Apple's done a good job of making it a tougher choice.

    Google's biggest problem is there are still no apps that really make the Nexus shine or stand out. There are now iPad apps to fill nearly every conceivable niche out there.

    No amount of discounting will fix the app disparity and people know it.

  • Report this Comment On October 23, 2012, at 11:16 PM, thethreestooges wrote:

    In 6 months, iPadmini will be $199 and iPadmini2 will be $325 again. Nesux still same old Nesux. Oh, I forgot. Goog don't make Nesux, it was made by another asian company Asuck or something like that. Goog is so original, can't even get a design team or hardware team together.

  • Report this Comment On October 23, 2012, at 11:56 PM, ScottmFool wrote:

    it's one thing to deal with Apple fanboys on cnet. That's expected. But here? Please people, can we try to be objective?

    Objectively, the iPad 3 (and now 4) is in a class all it's own, and is substantially better than every tablet that directly competes with it. However, objectively, in the smaller more cost-conscious tablet space the Nexus 7 and the new Kindle Fire are faster, less expensive, with better displays than the iPad mini. They're a better value proposition, which is a critical factor in the smaller-tablet space.

    And before fanboys talk about app "ecosystems", my home has both an iPad 3 and a Nexus 7 (I code for both. I'm typing this on a MacBook Air). Both platforms have access to similar apps of similar usability and usefulness. It's true that initially the pool of apps that worked on android tablets was small, but Google and developers have made substantial headway in supporting tablets for their existing apps, and now that is much less an issue. I go back and forth between both platforms, and find them similarly useful.

    For similar tablets, the iPad has historically been a better value compared to Android equivalents, it's one of the key reasons it's been dominant in the 9+inch space. But with the release of the iPad mini, the opposite is now the case: the Android tabloids are a better value.

  • Report this Comment On October 23, 2012, at 11:57 PM, mac44444 wrote:

    Only a Fool would pick a product based solely on spec-sheets. 100 million people have bought iPads because of the experience of using one, not on specifications. Sounds like you might be recommending stocks by P/E ratios alone. I'm not taking any of your recommendations seriously. I'm no Fool.

  • Report this Comment On October 24, 2012, at 12:03 AM, ScottmFool wrote:

    On October 23, 2012 at 11:16pm, a typical Apple Fanboy wrote:

    > Goog don't make Nesux, it was made by another asian company Asuck or something like that.

    Right...and apple doesn't manufacture anything in asia at all, and doesn't use any components designed by companies in Asia. Serious, try reading the news sometime.

    Please go to CNet. You will be welcome there.

  • Report this Comment On October 24, 2012, at 12:08 AM, ScottmFool wrote:

    On October 2, 2012, at 11:57pm, yet another typical Apple Fanboy wrote:

    > Only a Fool would pick a product based solely on spec-sheets.

    Only a Fool would read the above article and think that's what was said.

  • Report this Comment On October 24, 2012, at 4:25 AM, lojikfool wrote:

    Hi Rick, good food for thought, but I'm going to disagree with you for once.

    Your focusing too much on the price and not the product I think. Once you factor in hardware and software quality, ecosystem, apps, etc., it's worth the extra. Existing Apple customers will not have a problem. However, the question is whether Apple can win new converts with this idevice for a total of over 4m iPad mini's this quarter, I bet you a beer they can.

    Also a good point made earlier that the iPad mini can be discounted by 50-80 in 6 months or a year, when Apple comes out with it's super thin, lightweight OLED screen iPad mini!

  • Report this Comment On October 24, 2012, at 10:28 AM, beefangusbeef wrote:

    Way overpriced. It won't be a failure, but it won't be the success it would be priced more in line with other mini tablets.

  • Report this Comment On October 24, 2012, at 10:55 AM, BMFPitt wrote:

    So none of the Apple fanboys were able to comprehend the article, and instead raged against an imaginary attack on their beloved company? Never saw that coming.

  • Report this Comment On October 24, 2012, at 11:52 AM, Shepp67 wrote:

    The mini is a Big mistake (And yes I am an APPL shareholder and don't own either AMZN or GOOG).

    I own a Nexus 7, Fire, and iPad gen 1 (and for the record two iPhone 4S in this house too). The reason we bought the Fire and the Nexus 7 (the 64GB one for 249) was price point, and size - and that my wife and daughter hijacked the iPad) If today I had to decide on the iPad mini, Nexus 7, and Fire I would go w/Nexus 7. In fact I bought the N7 maybe 45 days or so ago knowing full well the iPad mini was coming... but I also knew the price would be too high for what I use a tablet for (email, reading, browsing, casual games, etc.)

    Eco-system - sorry but I have to say there's not one app I use regularly that isn't available for the N7 and the iPad, or an equivalent app is available (Fire on the other hand, Amazon is behind both APPL and GOOG). I'm sure others may disagree, but the fact is the major top N apps are pretty much available in both App stores (APPL and GOOG).

    329.00 is not the price point if APPL plans to dominate the small tablet market at the consumer level - since the majority of these buyers are cost-conscious. Those that can afford 499.00+ for the full sized iPad are not the people who are in the market for a smaller/affordable tablet.

    They should have released a 199.00 and 249.00 model, even 219.00/269.00 models would have made more sense and really made it almost impossible to resist for the cost-conscious consumer...

    Steve Jobs was right, the iPad mini should have never seen the light of day.

  • Report this Comment On October 24, 2012, at 12:49 PM, TMFCrocoStimpy wrote:

    I may be one of the few people that doesn't see this as a terrible price point. There strategy might have worked better to drop the price a bit, somewhere below the $300 mark, but the real problem that they are suffering from (and one of the most drastic changes that Jobs made when he returned to Apple after being ousted) is product spread. Apple now has 4 groups of closely defined products: handheld (iPhone/iPod Touch), mini, regular low res, regular retina. I group iPhone and iPod touch together because, except for the actual voice part (which is becoming less dominant in actual network usage), these are nearly the same device with/without cellular option. This is just too much clutter without a distinct space for each device, and it makes no sense. Honestly, I see no reason whatsoever for the iPad 2 to continue to exist, and to a lesser extent the iPod touch no longer really fills a role. Apple needs to bring themselves back to 3 form factors here: handheld, small tablet with moderate screen resolution, and high end tablet with retina display. This would provide a clean differentiation in size, specs, and price points rather than the muddle that we see today. Viewed in that light, I think Apple could afford to have a premium price of around $300 on their mini tablet product and still do just fine.

    Per disclosure rules, I am long AAPL

  • Report this Comment On October 24, 2012, at 2:07 PM, TheRealRacc wrote:

    Anyone interested in a collection of Apple-Fan-Boy-Syndrome and how pervasive the disease has become, e-mail me at cgracioppo@gmail.com

    I have a long list of comments from a variety of Internet sites which clearly display a sickness that has infected Apple consumers. It literally is quite sickening.

  • Report this Comment On November 02, 2012, at 12:26 PM, HDphoto wrote:

    As happens in many cases with articles on the internet, I have more fun and learn more from the COMMENT sections! Some of the comments here are really great and informative, others are funny, and all seem entertaining here over my breakfast. Better than reading the comics in the local paper, and you learn more too. Seriously, I don't have an iPad yet but really should have one and can use one in my work even. So, I am looking into the whole thing and who's on first in this evolving and exciting mobile revolution. The comments and article here are helping me see the differences of all these similar products available out there. So, thanks to the commenters, and the article author for keeping this conversation going and hope to see more good comment posts about the iPad and the other devices mentioned here.

    Disclosure: I never 100% believe most anything I read, I usually need to read or experience more first before really believing.

    Long on Apple since 2005

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