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Would You Buy Apple, Inc.'s New Old iPad?

By Adam Levine-Weinberg – Mar 22, 2014 at 12:00PM

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Apple, Inc. has finally killed off the iPad 2, but it's bringing back another old iPad as a lower-cost option for customers.

Ever since the introduction of the third-generation iPad in early 2012, Apple (AAPL 0.70%) has sold an older-model iPad alongside the latest and greatest members of the iPad family.

For the last two years, that spot has been filled by the iPad 2. Apple has maintained its starting price at $399 during that time, $100 less than the starting price for the newest full-size model. However, the iPad 2's run finally came to an end this week.

Apple is bringing back the fourth-generation iPad. Photo: Apple.

On Tuesday, Apple announced that the fourth-generation iPad will replace the iPad 2 as "the most affordable 9.7 inch iPad," taking over its spot at the $399 price point. The fourth-generation iPad will represent a much more competitive option for consumers looking to buy a full-size tablet while saving a little cash.

The iPad 2 takes its final bow
The iPad 2 celebrated its third birthday just last week. Since replacing the original iPad in 2011, the iPad 2 has gone on to become the most popular iPad model. According to Fiksu, the iPad 2 still accounts for nearly one-third of all iPad usage worldwide.

Nevertheless, the iPad 2 is starting to show its age. Three years is an eternity in the mobile technology world. Newer tablets feature faster, more efficient processors and higher-resolution displays, all in thinner and lighter form factors.

After Apple released the new, powerful (but thin and light) iPad Air, it was hard to justify trading down to the iPad 2 just to save $100. Recognizing this, Apple has finally decided to stop selling the iPad 2.

Enter the new "old" iPad
The fourth-generation iPad has become the new "old" iPad, replacing the iPad 2 at the $399 price point. While the fourth-generation iPad can't compare to the iPad Air in terms of design -- it weighs in at 1.44 lbs., compared to just 1 lb. for the iPad Air -- it is much closer in terms of performance.

The iPad Air is still Apple's top-of-the-line iPad. Photo: Apple.

For example, the fourth-generation iPad features the same type of "retina" display as the iPad Air. It also includes a relatively speedy A6X processor, which could run circles around the iPad 2's older A5 processor.

As such, the fourth-generation iPad is a solid option for value-conscious consumers who want a full-size tablet. This is particularly important because Apple has had trouble holding onto its tablet market share as cheaper tablets have become more common. The iPad held more than half of the tablet market as recently as 2012, but its market share dropped by 17 percentage points last year to 36%.

At $399, the fourth-generation iPad will be slightly more expensive than major Android competitors like Samsung's Galaxy Tab 3 10.1 and's Kindle Fire HDX 8.9". However, from a performance perspective it pretty clearly outdoes the former, while the rich iPad app ecosystem offsets the Kindle Fire HDX's superior technical specs.

In short, Apple's new "old" iPad is a much better deal at $399 than the iPad 2 it replaces. It matches up much better against competing Android tablets, and it is close enough in terms of performance characteristics to the iPad Air to make trading down a reasonable idea. (However, potential buyers should note that Apple is only selling the fourth-generation iPad with 16GB of storage, which may not be enough for many users.)

Foolish bottom line
The iPad 2 has had a good run in the past three years, but the tablet market has evolved significantly during that stretch of time. By last fall, competitors were offering much higher-performance tablets in the 9"-10" size range at lower price points. Moreover, Apple's iPad Air represented a huge upgrade for just $100 extra.

In this context, Apple's decision to bring back the fourth-generation iPad looks like a good idea. It's not likely to be as popular as the iPad Air or either version of the iPad Mini, but it should still be able to post respectable sales numbers.

Now it's time for you to weigh in! Would you consider buying Apple's fourth-generation iPad for $399?

Adam Levine-Weinberg owns shares of Apple and is long January 2015 $390 calls on Apple. He is short shares of The Motley Fool recommends and owns shares of and Apple. We Fools may not 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.

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