Smaller, cheaper iPad likely, to help Apple parry rivals - Columbus Dispatch

By  Nick Wingfield The New York Times
Nick Bilton The New York Times

Monday July 16, 2012 5:51 AM

The tech companies are at it again: trying to catch the blockbuster iPad in a race to win the tablet market.

On Friday, Google began shipping its Nexus 7, which is smaller and less expensive than Apple’s iPad and is meant to compete with both that device and Amazon’s Kindle Fire.

This summer, Microsoft announced that it would create a tablet, the Surface. Amazon is working on a new version of the Kindle Fire that will have a larger display to compete more directly with the iPad, according to a developer briefed on Amazon’s plans. Analysts also believe that Amazon is updating the Kindle Fire.

But Apple is hardly about to cede ground. The company is developing a tablet with a 7.85-inch screen that is likely to sell for significantly less than the latest $499 iPad, which has a 9.7-inch display, according to several people with knowledge of the project who declined to be named discussing confidential plans. The product is expected to be announced this year.

Apple’s plan for a tablet with a smaller screen is part of a textbook business strategy, to lure customers who want different sizes of tablets into the iPad product family, say analysts and technology-industry executives.

The strategy probably would include devices with different prices and functions tailored to various uses, they say. The idea is to help Apple solidify its dominance in the tablet market even as the richest companies in the tech business are trying to figure out how to outflank Apple.

Leslie Grandy, a former Apple manager who is a consultant and an adviser to startup companies, said a smaller iPad could be especially appealing to people who do not carry their iPads with them because they are too large and heavy. Although a 7-inch device is too big for pants pockets, Grandy said, it is a good size for women’s purses.

“I really do feel like this is the sweet spot for them,” Grandy said.

The company used a similar strategy throughout the 2000s to fend off rivals that were determined to kill the iPod, Apple’s digital music player, with their own products. The company fiddled with the design of the product so much that it ended up running the gamut from the $49 iPod shuffle, a screen-free iPod so small it could be clipped to the collar of a runner’s shirt, to the $249 iPod classic, a heavier device with space for 40,000 songs.

The company’s iPod strategy contrasts with how it handled competition in the phone market: Smartphones running Google’s Android operating system have elbowed their way past the iPhone in market share.

The most-credible challenge to the iPad appears to be Google’s Nexus 7, an Android device that costs $199 and is designed by Google. With a 7-inch screen, the Nexus 7 has won enthusiastic reviews for its software and battery life as well as its size and price.

Microsoft, in addition to creating the Surface, which could go on sale as early as the fall, also has agreed to invest up to $605 million in Barnes & Noble’s Nook business. The move helps bolster another Apple rival in the tablet market, one that could end up using Microsoft’s software for its products.

A decision by Apple to make a smaller iPad would be a clear break with the company’s past. During a conference call with Wall Street analysts in 2010, not long after the original iPad came out, Steve Jobs, Apple’s chief executive, memorably dismissed the 7-inch tablets then entering the market, saying they should be sold with sandpaper so that users could whittle their fingertips down to fine points.

“There are clear limits of how close you can physically place elements on a touch-screen before users cannot reliably tap, flick or pinch them,” Jobs said. “This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.”

Jobs, who died last year, was famous for both 180-degree reversals of opinion and deliberate diversions intended to keep competitors away from a juicy opportunity. His aversion to smaller tablets could have been such a diversion. Or, had he lived, Jobs might have changed his mind about the product.

Either way, Apple has warmed to the idea of a 7-inch device. The company has sought to further attract customers to the iPad by continuing to sell the second-generation version at $399, or $100 less than the latest version, which boasts a high-resolution screen known as a Retina display.

Horace Dediu, a blogger and independent analyst, thinks Apple is interested in a 7-inch tablet because lighter, smaller devices are better suited, in many situations, to media, especially books. For activities such as typing email, Dediu said, the larger iPad would probably have an edge.

To emphasize the new device’s media-playing functions, Dediu suggested, Apple could even position it as a next-generation version of the iPod Touch, rather than as an “iPad mini,” as bloggers have called the product.

“What I think is happening in the post-PC world is we’re breaking the jobs PCs were hired to do into device-centric solutions,” he said. “This is why it’s not enough to look at tablets as one category.”