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Summary:

Apple’s plans for a 7-inch iPad are a very hot topic heading into the new year, but they may not bear any tangible fruit for consumers in 2012. A Wedge Partners analyst doesn’t think it’s in the cards. Instead, Apple might offer a cheaper iPad 2.

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Apple’s plans for a 7-inch iPad are a very hot topic heading into the new year, but they may not bear any tangible fruit for consumers in 2012. Wedge Partners analyst Brian Blair told AllThingsD he doesn’t think it’s in the cards, even though Apple definitely seems to have been testing the idea.

The 7-inch iPad has been in testing at Apple for “over a year,” according to what Blair told AllThingsD’s John Paczkowski, but the firm doesn’t expect the company to release anything for the public based on that design in 2012. That runs contrary to reports we have heard earlier, including one from last week that suggested a 7.85-inch device was set for a late 2012 introduction, based on supply chain information.

My colleague Kevin Tofel suggested that there were good reasons to believe a smaller iPad could indeed be on the way; these include portability, credible competition in that space, dwindling iPod touch sales and a lower price point. Blair thinks that price is the main issue Apple actually has to address in terms of keeping the competition in check, and he suggests that Apple can work on that element without compromising on a screen “too small to express the software,” as Jobs had described the 7-inch form factor.

Instead, Wedge Partners sees Apple’s keeping the iPad 2 as part of its lineup following the introduction of an iPad 3 and just dropping the price of the iPad 2. It’s a strategy we have seen Apple use with the iPhone; it keeps the previous-generation device available as a lower-cost option, and with the iPhone 4S launch, it even kept the iPhone from two models ago, which can be had for free with a contract in the U.S.

Obviously Apple didn’t do this with the original iPad as a low-cost alternative to the iPad 2 this year when the newer tablet was introduced, but the situation has changed. When the iPad 2 came out, there was no tablet competitor that posed any real threat to Apple’s dominance. Now the Kindle Fire appears to be doing well, and Apple has to consider that others will join it and Barnes & Noble with an end run at the low end of the market. Also, the iPad 2 offered relatively little in terms of big splashy changes over the original; if an iPad 3 comes packing a Retina Display, as rumors suggest, it should be a big-enough upgrade to allow the iPad 2 to remain on sale without drawing too many sales away from the newer device. This is especially true if Apple cuts the storage on the older device to 8 GB, as it has traditionally done with older iPhones.

A cheaper iPad 2 alongside the iPad 3 is a way for Apple to have its cake and eat it too. It can press the advantages of a larger screen while also competing on price, which would work well from a marketing perspective (“Bigger is better, but not more expensive”). We will have to wait and see to find out what Apple actually does, but Blair’s thinking makes an awful lot of sense to this Apple watcher.

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  1. Laughing_Boy48 Friday, December 23, 2011

    A lower-priced iPad 2 makes more sense in the Apple way of doing things although I hope they at least sell a 16 GB iPad for about $100 less for those consumer that believe $499 is too much to pay for a tablet. I’d only hope for a 7″ tablet from Apple to pester Amazon’s sales, but Apple wouldn’t sell any tablet for $199 so it probably wouldn’t do Apple any good. Apple should just go with the lower-priced iPad 2 which could be used in schools and health care industry. It would probably be good for small businesses that use iPads, too.

  2. the author of this article has pretty horrible grammar and writing style. It’s seriously hard to read this article.

    1. To Kevin: Are you making a joke? Your two sentence review has at least four grammar mistakes…

  3. They won’t keep the full iPad 2 line alive if they do this. It will only be, I’d be, the wifi models and probably not all of those. Alternatively, they keep the bottom 2 models (i.e. the 16g wifi and 3G) alive if they feel they need to offer 3G for competitive reasons.

    However, I’d like to see GigaOm do something no one else seems to… question the analyst record. In Kevin’s linked article he cites Digitimes which seems to have a spotty record. This article cites ATD’s discussion with an analyst… but what’s the guy’s record? Does he have any special insight into Apple’s product doings or is he just some guy?

  4. Analysts – I wouldn’t trust them as far as I could kick them. How many times in the past have analysts been proven wrong? And why do tech journalists present their opinion as fact? In an industry as rapidly changing and volatile as IT, I would not put money on the word of some guy just because he calls himself an analyst.

    Maybe instead of spinning around sensationalist articles fulled with speculation and BS, GigaOM put in the effort with a background check on these characters, did some of it’s own homework, and invested in content that shows genuine time and effort. Hey Om, when was the last time you did YOUR OWN research?

  5. Christopher Armenia Friday, December 23, 2011

    Sounds plausible. Keep the iPad 2 alive in an 8 GB wifi configuration for $249-$299 to compete with low end tablets like they did with iPhone 4. As long as the iPad 3 lives up to the hype (retina display, A6 chip, 4G LTE, Siri?) iPad 2 shouldn’t cannibalize its sales too badly. Personally, I would like to see AT&T, Verizon, and Sprint offering subsidized pricing on 3G models with a data contract.

  6. P Howard Dilling Friday, December 23, 2011

    Yeah, and Apple is going to add a slide-out keyboard and a floppy drive to iPad 3. Why do analysts insist on publishing articles about products Apple is never going to produce? Has anyone listened to what Steve said abou the 7″ form factor?

  7. so basicly its a ipod touch with a new name

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