Apple Inc will host an event on October 23 where it is expected to
unveil a smaller iPad that will take on the less expensive devices
offered by Amazon.com Inc and Google Inc, a source familiar with the
matter said on Friday.
Wall Street analysts have predicted for months that Apple was planning a smaller, less costly version of its
popular iPad to take on cheaper competing devices, a move that analysts
say might hurt its margins, but prevent its rivals from dominating an
increasingly important computing segment.
The source did not specify what the product would be and an Apple
spokesman declined to comment, but tech blog AllThingsD reported earlier
on Friday that Apple would launch the mini iPad at the event. The
device is expected by many experts to have a screen between 7 and 8
inches (18-20 cm).
A smaller iPad will directly compete with e-commerce company Amazon's
Kindle Fire HD tablet and Google's Nexus 7. Both devices have 7-inch
screens and sell for $199. The first Kindle Fire, launched last year,
grabbed about a fifth of the US tablet market.
The consumer device company is gearing up to unveil a new product at a
major October 23 event, said the source, who declined to be named, only
days before Microsoft Corp unveils Windows 8 and its new Surface tablet
on October 26.
The Nexus 7, manufactured by Asustek Computer Inc, has also seen a
successful start, with the tablet selling out soon after launch.
One Wall Street analyst said he had seen the smaller tablet, dubbed
iPad mini by the media, while visiting component suppliers in Asia.
"We actually had the opportunity to play with a pilot iPad Mini used
by one of the vendors," Topeka Capital analyst Brian White said.
"This 7.85-inch iPad Mini fit our hands like a glove and we were
easily able to tuck the device in our sport coat, offering consumers a
more mobile iPad experience for certain use cases."
Apple events are typically among the most-watched items on the
industry calendar, monitored by consumers and technology investors
alike. The event in two weeks, however, comes at a time of volatility
for the popular technology stock.
Apple shares closed up 0.25% at $629.714 on the Nasdaq market, barely
recouping significant losses suffered over the past three weeks as
investors cashed out after it touched an all-time high of $705.07 on
September 21.
While the stock is up 55% this year, it is currently down 10% from its record high.
Wall Street analysts have cited concerns about disruptions of iPhone
supplies after a riot in September at one of the plants operated by its
main contract manufacturer, Foxconn Technology, and sharp criticism from
consumers about errors in its Maps service.
Margin risk?Apple's fiscal fourth quarter
financial results are scheduled to be released on October 25, two days
after the event, offering analysts a rare opportunity to grill
executives about a new product just after details are made public.
A smaller iPad could be a risk to Apple's industry-leading margins,
given that neither Amazon nor Google has been known to make much money
from the smaller tablets.
Amazon's first Kindle Fire just about breaks even, according to IHS
iSupply estimates. But the internet retailer sells a lot of content -
music, books - through the Kindle line.
Google has said that its $199 Nexus 7 is being sold at cost and has no profit margin.
Apple earned gross margins of 23% to 32% on its US iPad sales between
October 2010 and the end of March 2012, a court filing by Apple in a
recent patent trial against Samsung Electronics Co Ltd revealed in July.
The company's margins on US iPhone sales are almost double those of the iPad, averaging between 49% and 58%.
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