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Bigger is not always better, and this may be the case for the feverish speculation surrounding a smaller version of Apple's iPad.
At least for right now, the rumored 'iPad mini' is just that ? a rumor. Still, it would be highly profitable for Apple if it comes to market, and would likely outsell its full size predecessor two to one, Patrick Moorhead, of Moor Insights and Strategy, said.
That, however, depends on whether the price is right.
"If they would price it at $299 they would kill most of the 7-inch competitors," Moorhead said. "Apple's iPad would probably be about an 8-inch tablet, but it's going to catch on very quickly if nothing else because it says Apple and it's priced at $299."
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Despite the lack of guidance from the tech giant, rumors about an approaching launch date are likely true because Apple needs a smaller iPad to ward off competition in the tablet market, Moorhead said.
The iPad maker, which sold 17 million iPads in the fiscal third quarter alone, currently leads the tablet market overall, but Apple's competition is gaining ground in the smaller tablet market, Moorhead said.
"Apple wants to dominate all form factors for this kind of device. If you look at overall market share, they have 90 percent of tablet share today, but they don't want to give an inch or even leave an opening for a competitor, not an OS or an ecosystem," Moorhead said.
Yet Brian White, an analyst with Topeka Capital Markets, said he doesn't think its necessarily competition that is driving Apple to make a smaller iPad. White says it's a chance for the company to cash in on a growing market.
"I think they see a big opportunity they can tap into that they can't with the full size tablet," White said.
White, who has a 12-month price target for Apple of $1,111, said his firm has not factored in a mini iPad into their outlook for Apple, but they also expect a Fall launch.
The analyst, who prices a smaller iPad in the $200 to $250 range, said he also thinks a smaller iPad would likely outsell the full size tablet in the long-term and would cannibalize 10 to 20 percent of the full size iPad sales.
Apple's late CEO Steve Jobs shrugged off the idea of a smaller tablet in 2010, stating in an earnings conference call that 7-inch tablets were "dead on arrival."
However, court documents from the recent Apple versus Samsung patent case revealed that Jobs may have changed his opinion about the smaller tablets. (Read more: The Apple Email That's Likely to Worry Google, Amazon)
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"Even though there are other tablets on the market, people have an affinity for Apple and they are willing to pay up," Moorhead said. "Apple loyalists will buy them, and those people who wanted to buy Apple iPads but couldn't afford a full size iPad."
Also, a more affordable iPad would allow Apple to drive sales to schools, and open up the tablet market to more developing countries like China, White said.
Yet while a smaller iPad would be highly profitably for Apple because it would open up a totally new market for the company, Moorhead thinks the iPad maker may not be the biggest player in the smaller tablet space.
"I dont see Apple being as dominant as they are in the larger market. The competitive environment is much different," Moorhead said.
Google's Nexus 7, Amazon's Kindle Fire and Samsung's Galaxy Tab and Galaxy Note devices are Apple's primary contenders.
White, however, disagrees.
"Most of the other tablets are horrible. Here's a company that is going to link you into their ecosystem and give you a good product," White said. "I think it will destroy competition."
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? 2012 CNBC.com
Source: http://www.cnbc.com//id/48827530
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