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iPad Mini Seen As Defensive Move Boosting Apple Sales

NEW YORK — The launch of the 7.9- inch iPad Mini may have been a defen- sive move to gain sales in a tablet seg- ment pioneered by Apple’s rivals, but the launch will dramatically increase Apple’s iPad sales, analysts said.

With a starting price of $329 for a Wi-Fi version, however, the Mini will leave room in the market for 7-inch An- droid tablets priced from $159 to $299 from such companies as Google, Ama- zon, Kobo and Barnes & Noble, multiple analysts added.

Although Apple will trade some full- size iPad sales for lower-priced iPad Minis, the company will more than offset the cannibalization by expanding its po- tential customer base, analysts said of Apple’s potential gains. “Apple has al- ways been comfortable with cannibaliz- ing their sales as long as someone else doesn’t cannibalize their sales,” said IDC analyst Tom Mainelli.

Whether the Mini will increase Apple’s global tablet share is another story.

Apple’s tablet share peaked at 73 percent of worldwide unit shipments in 2010 when the iPad was launched, fell to 62 percent in 2011, and is forecast to slip again in 2012 to 54 percent, said research company Ovum. iPad market share in North America slipped in 2011 to 73.5 percent from 2010’s 84.5 per- cent and is expected to slip again in 2012, though the 2012 drop will be less steep than the global drop, Ovum said.

The launch, several analysts said, marks the first time in recent memory that Apple is responding to market pres- sure rather than leading the market.

 “For the first time in its recent history,” said Ovum analyst Adam Leach, “[Ap- ple] is responding to market pressures from its competitors, namely Google and Amazon in bringing a smaller tablet to market.” In the past, Apple “has defined new products with new form factors and waited for the market to follow, [but] in this instance Apple is following the mar- ket trend towards smaller cheaper tablet form-factors.”

“This reflects a fundamental change in the way Apple operates,” Leach continued. “Apple is assuming that a low- er cost iPad will allow them to sell sufficiently more units to offset the dilution in ASP that a cheaper device is likely to cause.”

For his part, Neil Mawston of Strategy Analytics called the Mini launch “a de- fensive, not offensive, move by Apple.” The 10-inch tablet market is dominated by Apple with 75 percent global share in the second quarter, “but Apple’s share of the sub-10-inch tablet market is zero, and it is moving to address that gap with the new 8-inch iPad Mini.”

Although the new iPad Mini is priced at a hefty premium to rivals like Google’s Nexus 7, “Apple has never engaged in a race to the bottom on pricing, so it will not be too worried at this stage by the in- dustry’s vocal criticism of its 300-dollar- plus price-points,” Mawston said.

 “We expect the iPad Mini to instantly become the world’s best-selling sub- 10-inch tablet by the end of this year,” Mawston said.

The Mini launch acknowledges a bifur- cation in the tablet segments, one analyst said. “As consumers look to smaller tablets — with screen sizes of less than 8.5 inches — different-sized tablets are expected to coexist as two separate segments, with con- sumer research indicating that larger tablets are predomi- nantly used in the home whereas smaller, lighter tablets are more often used on the move,” said Futuresource ana- lyst Joe Mugan.

 Apple’s iPad Mini “will inject additional growth into the smaller screen category,” he added.

IHS iSuppli agreed. The Mini will help trigger a doubling of worldwide shipments of tablets with screen sizes in the 7- to 7.9-inch range in 2012 and a near-doubling in 2013, IHS iSuppli said.

Sales of tablets with displays in that size range will jump by about 100 percent in 2012 to 34 million units, up from last year’s 17 million, and 2013 sales will rise another 96 percent to 67 million, IHS iSuppli said.

Just as Apple dominates the market for 9.7-inch tab- lets, “the company is poised to rule the market for 7.x-inch products, driving rapid growth of the segment in 2012 and 2013,” said Rhoda Alexander, director of IHS’s tablet and monitor research.

“The major factor limiting shipments of the smaller iPad will not be demand but a combination of production challenges and potential component supply issues,” she said.

Additional factors driving Mini demand, despite less- than-Retina display quality with 163 pixels per inch on its 1,024 by 768 touchscreen, include a size that looks “dra- matically larger” than 7-inch tablet displays and an aspect ratio that’s the same as the full-size iPad, IDC’s Mainelli said. That means all apps designed for the big iPad will play as intended on the Mini, he noted.

The Mini’s aspect ratio, he continued, is not as narrow as the screens of 7-inch tablets, so displayed content looks good in both portrait and landscape modes, whereas “7-inch tablets beg to be used in landscape mode,” he said.

Along with the iPad Mini, Apple also launched a refreshed 9.7-inch iPad, which like the Mini features the new eight-pin Lightning connector.

The Wi-Fi versions of both products were to be available Nov. 2 in multiple countries, and the 4G cellular versions will ship about a week later in the U.S., with other countries coming on board sometime later.

The iPad Mini with Wi-Fi is priced at $329 for the 16GB version, $429 for 32GB and $529 for 64GB. The cellu- lar versions are priced, respectively, at $459, $559 and $659. It lacks the full- size iPad’s Retina display.

The company retained the 16GB iPad 2 at $399. The iPad Mini, available in white or black, performs better than the iPad 2, the company said, and features dual-core A5 processor, 1,024 by 768 dis- play, HD front camera and 5-megapixel rear camera with 1080p video capture while retaining 10-hour battery life.

The Mini is 7.2mm-thick, or 25 percent thinner than the fourth-generation iPad, and it’s 58 percent lighter at 0.68 pounds.

The new full-size 9.7-inch iPad, which replaces the “new iPad” launched about six months ago, gets a two-times faster processor (A6x), two-times faster Wi-Fi incorporat- ing two-band 802.11n, front camera upgraded to 720p, and an LTE chipset that adds compatibility with the U.S. Sprint and Japan KDDI LTE networks.

The price of the fourth-generation iPads are the same as the current “new iPad” models, ranging from $499 to $699 for the three Wi-Fi models and $629 to $829 for the three 4G models.

The launch of the fourth-generation iPad likely does not reflect future Apple plans to launch two iPads per year but more likely reflects a desire to align iPad launches with the holiday selling season, said Mainelli. Consumers interest- ed in buying an iPad for Christmas have had to choose be- tween a model available since March or wait three months for the next-generation model, he explained.