Why Apple didn’t release a $299 iPad

“In the weeks and months leading up to Apple’s Wednesday announcement of a third-generation iPad, there were rumors the company might introduce a $299 version to be more competitive against low-cost tablets such as the Kindle Fire and Nook Tablet,” Seth Fiegerman writes for TheStreet. “One version of this rumor claimed that Apple would debut a 7-inch iPad in the $249 to $299 price range; another claimed the company would introduce a cheaper 8 GB iPad 2; and some just speculated that the company could choose to slash the price of the baseline 16 GB iPad 2 to $299.”

“pple did cut the price of the iPad 2 from $499 to $399 and has even gone so far as to offer a refurbished version for $349, but that’s as low as it’s willing to go, at least for now,” Fiegerman writes. “The company thinks being too aggressive in pricing the iPad 2 might actually do more harm than good. It would cut into profit margins and there is not enough competition to justify that loss.”

Fiegerman writes, “Some might wonder why Apple hasn’t simply offered the first-generation iPad for $299… ‘There’s a certain amount of capability that they want current devices to have,’ says Michael Gartenberg, an analyst at the Gartner research firm, who notes that the first-generation iPad may already be a little too outdated to be marketed as part of Apple’s current product line, no matter how much it costs. ‘We are already seeing applications that are sophisticated and complex that don’t work on the original iPad. That’s something that will only get worse over time.'”

Read more in the full article here.

MacDailyNews Take: No real competition means no $299 iPad.


    1. That’s actually very true. Any iPad that is sold for $299 would have significantly lower profit margin per unit compared to the iPad 2 for $399 and the new iPad starting at $499 (and up). Apple can sell every iPad they make, almost as soon as it comes out of the factory. They would only be competing with themselves, and lowering overall profit, if there was such an ultra low-end model.

      Also, I don’t think Apple wants to compete with Kindle Fire. I think Apple likes having Kindle Fire around at $199, to “block” other competition (such as Samsung) from making a profitable low-end tablet that sells for $299. Kindle Fire also helps Apple by more rapidly expanding the customer base for tablets; those customers will eventually want a “real” iPad.

  1. It seems to me that these analysts/journalists/etc. are just too used to corporations chasing profit as opposed to chasing the desire to make the best products and user experience possible.

    1. There will be no 7″ or 8″ iPad. There’s no reason. All that does is remove space for additional battery. It doesn’t save much on production cost, besides the screen and a little bit of aluminum for the case.

  2. @ Ballmer’s left nut

    What’s with the lame-o flash video? Go with the times! Even Adobe is abandoning it. Or are you trying to show your age?

    1. BLN is lame too, but you don’t know what you are talking about.

      It’s a YouTube video, not a Flash video. It’s only using Flash on your computer because you have a Flash plugin, but it’s completely HTML5 compatible.

      If you were really against Flash, you wouldn’t have the Flash plugin installed, and the video would play anyhow as HTML5.

  3. And there was never anyone seriously speculating that the iPad 2 would drop to $299. I don’t know where the author got that. People like me, who think iPads need to get cheaper in order to expand the user base, wanted the iPad 2 to remain on the market for $399. That’s what Apple has done. That they’re still selling the iPad 1 for $299 is an added bonus.

    Apple is clearly intent on lowering the entrance fee on iPads, they’re just doing it at their own gradual pace. Competition or no competition, they want to reach a point where they’re selling hundreds of millions of iPads a year, and you can’t do that with a $499 starting price.

    1. There were some people on this forum who speculated $349 or $299 for the base model iPad 2. Some had Apple reducing the storage to 8GB.

      Many of us called the $399 price point, however, as well as key design aspects of the new iPad. That makes up for the other times when I have been wrong…

  4. Apple sells as many iPads as they can make with the current pricing structure. Only someone dumb enough to be considered an “analyst” would think this scenario calls for price cuts.

    1. Yes but they want to make more and sell them to more people. That requires a gradual lowering of the price of entry, the same way they did with iPods and the iPhone.

      Do you think the iPhone would be what it is today if Apple left it unsubsidized at $399 and $499?

      1. iPhone was NEVER unsubsidised. Original iPhone price was around $850. With the nominal $450 subsidy they were getting from AT&T, that brought it down to $400 (or $500 for the bigger version). Apple reduced the retail price of the iPhone to $650 for base model some two months after the launch and it has remained there ever since (over five years now).

        If iPad price continues to follow pricing philosophy of iPhone, there will be no price reduction of any new iPad model for the foreseeable future.

        1. Yeah you’re right on the AT&T subsidy, my mistake.

          I also don’t expect any new iPads to drop below the $499 threshold. But so long as the older generation(s) hang around, the bottom line is that the price to buy into the iPad family has become a lot more reasonable to a lot more people.

      2. No it doesn’t. Lower prices equals higher volume is a deluded economic principle taken out of context. It is not a commodity and the market has a lot of growth based on awareness spreading into a still vast untapped market. The other mistake is to think that Apple is expensive and somehow prices must come down. My iPad is absolutely incredible value for the price. Buy on value not on price or go PC.

  5. Apple is not going to sell iPads at a break-even or at a loss just to grab market share. Just look at the iPhone: How long did we have to suffer with iPhone nano rumors, only to never see one?

    The iPad is the perfect size. It is markedly different from the iPhone, and if the iPhone grows slightly (4″), then a 7″ iPad looks even more like a big iPhone rather than a distinct product line.

    1. The iPhone is a different beast. It’s exceptional because of the heavy carrier subsidies which allowed Apple to lower the upfront price while maintaining a high retail price. If carriers didn’t subsidize the iPhone to the point where it could be sold for $299-$99, it wouldn’t be anywhere NEAR successful. In that case, you probably would have seen something like an iPhone nano to lower the cost of entry.

      The iPad is different, it’s more like the iPod in that Apple must lower the costs in order to lower the price of entry because it’s an unsubsidized product sold directly to us.

  6. Steve Jobs himself told us why we aren’t seeing cheap iPads:

    “We can’t do it; we can’t ship junk. There are thresholds we can’t cross because of who we are.”
    – SPJ, 2007

    1. ???

      AAPL has surpassed GOOG a long time ago (AAPL is worth over $500 B today, while GOOG is still below $200B).

      The nominal price of one single share is an arbitrary relative number that doesn’t really mean anything.

  7. Regardless of the company or product in question, if the supply and support chains are operating at maximum capacity and demand is keeping inventory to a minimum, lowering prices will only result in reduced profits and revenues while accomplishing nothing positive.

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