20% of non-iPad buyers would consider a $399 entry-level iPad 2

One way to experiment with lower iPad prices might be to start with an iPad2-based model aimed at the education market. Maybe sell a 16GB wifi version with no camera (the education market might actually prefer a model without a camera --- what school wants to deal with the controversies that could develop with kids and school-provided cameras?). Maybe sell it to the education market (schools and teachers) for $349. Then later open it up to everyone for $399.

I think a $399 16GB WiFi-only iPad 2 is very likely.

In related news: Apple will sell 100% of all iPad 3s it can make.

Removing the camera isn't really necessary. Apple offers the iPhone Configuration Utility (for OS X and Windows) that will easily lock down any HW, apps, and/or features one doesn't want used. In fact, even parents who are reading this thread but also who want more options than what Parental Controls offer can use this free app to lock down iDevices.

I'd like to know what percentage of people they surveyed were planning to purchase an iPad3.

How long will it be until apple finally starts differentiating iOS products beyond simple storage increases?

I half expect that in Education if not even lower prices for bulk, not sure Apple would do it for general public. We shall soon see though ... exciting times

I could see an Education-only 16GB WiFi-only iPad 2 for less money in lots of 50 or 100 for $349.

BFD. Apple doesn't want to own the entry market of disposable goods.

Apple's already helping the Education market tremendously with this Books initiative which will save school districts millions.

Very possibly. Chasing the low end is what got Acer, HP and Dell in trouble. Apple makes aspirational products, not commoditized crap.

There, fixed that for you...

Back to the thread....

Useless statistic. What people say they will do is always very different from what they do do. Ask me if I will upgrade my iMac this year and I am sure to tell you yes... that is my wish and intention and definitely my need. But ask me again at year's end if I did and you will in all likelihood get a different answer.

16 GB is way too small for education since iBooks textbooks are running into dozens of gigs for each subject. They need more like a 64 GB to be usable with iBooks Author files.

A $399 iPad 2 is commoditized crap? You guys sound like such snobs.

How many of you were on here espousing the virtues of an unsubsidized iPhone a couple years ago? "An iPhone for $199? Go buy a Motorola, you peons."

It's funny listening to business analysts who think Apple should accept lower margins and just dominate the market with "Cheap disposable crap."

I think people forget that Apple wants to sell innovative good products. Ask anyone what they want for their birthday or Christmas. They want an iPhone or iPad. Emphasis "want", I may want a pony too but I'm don't have a property for one

The resale market for iPads and iPhones are huge, not that different from the Toyota Prius actually (3 year old pre-owned ones are nearly the same prices as a new current model.) You can't say the same about most other models. What will happen is that 3 months after the release of the iPad3 is that all the pre-owned iPad1 and iPad2 inventory will be gone till the next release.

iPod nano?

I am going to go out on a limb and say that Apple is going to continue the iPad2 but at $299 with only 2 models, lower storage, wifi and a 3G version.

Since we all saying stuff.

They are far smaller than that. Here is the breakdown for the 10 textbooks on iBookstore:

• 929 MB
• 934 MB
• 970 MB
  
  
• 1.11 GB
• 1.22 GB
• 1.26 GB
• 1.50 GB
  
  
• 2.31 GB
• 2.35 GB
• 2.79 GB

That's there under 1GB, six that are under 1.5GB, and 3 that are 2 to 3GB. The ones that are over 2GB are al from Pearson with the same subjects by McGraw-Hill being about half the size.

Even at 3GB per book that means you can 4 large textbook subjects on a 16GB iPad per semester which should be more than sufficient for the nascent digital textbook market. To wit there are not too many offerings at this point and even as this market grows there will be plenty of classes that simply won't be candidates for large textbooks.

Literature typically involves several small books that contain only text from various authors and other classes will not be candidates for a long time or at all. By the time this grows to something more excessive (say in two years) 32GB will very likely be standard for an entry level iPad.

Now an 8GB WiFi-only iPad for the HS education market or trying to get a full course load of college textbooks on a 16GB iPad would be an issue.

I would love to see this. And from the iSuppli teardown done a year ago and adjusting for normal cost decreases in component prices over time, Apple could still make a modest profit margin of about 18% on this. (My own calculations on this.)

Along with this, I would like to see them release an iPad 2S with a non-retina display (using this screen with the still selling iPad 2 should keep prices down due to quantity bought) and A5X processor (which I think will also be installed in the new Apple TV and possibly a new mid-range iPhone 5 to address emerging markets) starting at $399.

Then sell the iPad 3 with retina display and A6 processor starting at the normal $499.

None of these would be "commoditized crap" unless of course one currently considers the iPad 2 to be "commoditized crap" because it would be exactly what Apple is selling now, or slightly better.

This would also put the maximum amount of pain and pressure on the competition. Tim Cook stated about a year ago that he was not going to surrender any market segment. Soon after Apple kept the iPhone 3Gs on at $0 with contract in the mobile phone market. Since Apple doesn't really have the iPad 1 still in production I could see them building a mid range iPad model to bring the iPad into line with their current pricing scheme used for the iPhone and thus not really surrendering any market segment.

At least that is my hope.

18% profit margin? Not only is that halfing the profit margin it's almost getting 1/4 of the profit.

While you want that as a customer you need to look at this from Apple's PoV as a seller. They have no competition. They have no loss of sales. There is no reason for them to make less profit in the tablet market. Yes, I mean less because if you're selling as many as you can make selling them with cheaper won't increase unit sales.

I am sorry, but I have to disagree about 4 large textbooks being enough. The schools that I am familiar with that have moved to digital textbooks and the ones that are seriously looking into it are, or have, all moved from dead-tree textbooks to digital. Thus, four classes worth of textbooks isn't enough. You would need at least 8 classes worth (a typical school course load) and then add apps and other desirable things to the books storage required.

It is for this reason that I could easily see Apple upping the storage from the now standard, 16, 32, 64 GB to 32, 64, 128 GB. Besides, the sizes of the books are only going to go up as publishers and authors figure out how to better incorporate 3D and Hi-Def video that takes advantage of the Retina display.

Speaking of which, the Retina Display and the talk of moving to 1080p video is another reason that I see Apple moving towards higher storage amounts, not smaller. Higher res requires more space to store. It is also a good way for Apple to differentiate itself from its competition.

Thanks for looking into the current books.

I based my earlier remarks on the fact that the premier example offered at the release of IBooks Author, 'Life on Earth', contained 2 short chapters and weighed in at over 1 gig. I'm currently working on a science book and a social studies text book, each have approximately 20 chapters and a total 1000 pages. Every page is packed with graphics and the client wants many of those graphics turned into movies. If I did every page exactly equivalent to the printed text book, I would be looking at 100s of gigs for each book.

What 8 courses do students take in one HS semester that will require textbooks (not rhetorical, I want them named)? They certainly aren't on the iBookstore.

Assuming you are correct there are 8 courses per semester that require large digital textbooks even if they all 1.5GB that will be 12GB, which is well within the acceptable range.


How will Apple do 128GB? Smaller lithograph with slower speeds, less write cycles and with greater cost -or- doubling up the number of NAND chips?


The difference between iOS for the iPhone 3GS and iPhone 4 have shown that rendering for 2x resolution isn't a huge concern for OS and app sizes.

And here's where the resale value of iPad 2s collapses. Ah well. I do think a $399 iPad 2 will be good for the entire platform.

Since when is Apple's goal to be a manufacture of cheap products?... (i.e. supply the "poor" with a luxury item?)... i say forget it, if you can't afford it, save up for it, or get a cheap product. OR how about doing without?...

AN ipad is a luxury. ... if an ipad is "steak" and a android tablet is "cake" ... i say let them eat cake!.

I thought that's what you were getting it but yoou should have qualified your comment. I didn't respond to that because I have a rebuttal for that comment too. That book is probably not very efficient and/or was looking to be the poster child of how impressive a textbook could be.

But here's the real clincher, a textbook could be bought in parts (currently $14.95 is the only allowed price as far as I know which is not adequate for college material) or could be bought with in-app chapter purchases that could either be paid for or free and removed as needed.

Either way this isn't an issue at this point as HS textbooks will cover a much smaller subset of a topic than college textbooks. If we go by Life on Earth with 20 chapters at 500MB each, and this odd 8 textbook per semester requirement then 128GB is the minimum HS students will need... and that's just not realistic.

What they do know is the Kindle Fire is selling well. Hear me out for a minute before attacking me. It is highly unlikely someone bought a Kindle Fire that would have realistically purchased an iPad. The question is this: would a $399 iPad keep someone from buying a Kindle? The answer to that is unknown.

It isn't always about keeping sales. The goal with a $399 iPad would be to attract new, first-time sales. I imagine that with every iPad released the number of "new" iPad sales (as opposed to "upgrades") is decreasing drastically. If you were willing to spend $500 on a tablet, you probably would have done so by now.

The numbers investors are expecting Apple to post on a regular basis means that Apple cannot risk "losing" possible sales.

CLARIFICATION: By "losing" sales here I am referring to Apple NOT making sales they COULD have made with a $399 iPad. That number appears to be approximately 20% of tablet consumers- and that is significant to say the least.

I am looking at this from Apple's POV.

To say that they have no competition, forgive me, is a little short-sighted and a lot "head in the sand". Steve Jobs said it best, "If we are going to be cannibalized I want us to be the one doing it."

Microsoft will be releasing their Windows 8 tablets within the year. From the reports and reviews it will be a decent tablet and will offer some features that Apple doesn't offer at this time, if ever, in their iPads. Taking a page from Microsoft's playbook, the best defense against this very real, upcoming competitor is to grab as much market share as possible before its release and entice customers into investing in the iOS ecosystem. If the rumors of the release of Office for the iPad are also true, which I believe then it is paramount that Apple makes their move sooner rather than later to cement their position in industry (which I know they haven't cared about in the past, but looking at what they have done with iOS over the last few years they obviously care about now).

I am going to lump Samsung, Motorola, and every other pretender out there into one category of Google Stooge. The Google Stooges out there might not have done so hot up to this point, but don't think for a second that they have given up. And with backing coming from Google and Intel to prove that they can make something just as good or better than Apple those are some deep pockets gunning for Apple in the tablet market.

Amazon isn't going anywhere and if rumors are to be believed, and I see no reason not to believe them, they will be releasing a large screened Kindle Fire soon to more directly compete against Apple. Honestly, I think that Amazon is actually a bigger threat to Apple than any of the previously mentioned competitors because, unlike the others Amazon has an already flourishing digital ecosystem and a well known, and respected brand-name by the general public. Say what you want to about the Kindle Fire (I will agree that it is nowhere near as good as an iPad), but it was a first try at the tablet game. They will get better, if for no other reason than that it is always easier to follow than to lead. Apple has already shown the others the path that they need to take, and Amazon is doing a better job than any others in following it. Then there is the fact that Amazon makes their money on the content and thus can afford to compete on the price of the hardware. So, I don't think that Apple should try to compete on the price point with Amazon, that is a losing game, but they should strive very hard to get it in the ballpark and not more than twice as much.

As for making less money. Yeah, they are going to make less money by doing what I am proposing, but it is like my CEO is fond of saying, "Sometimes you have to go underwater for a bit to come up ahead in the race." Apple would still make a profit, not as larger, but still a profit, and they have the cash to handle some lower profits for a year.

In exchange for this year of slightly lower profits they would maneuver themselves into a much better position for the future by grabbing some market segments and stabilizing their market share base. And don't think for a second that market share isn't important. iOS is doing as well as it is because of its excellent developer base. That base will only stick around as long as it is best for them. If Apple loses the market share to a competitor than many developers will move to the more profitable platform. And that is not good for Apple.

So, I am thinking from Apple's POV. We may not like it as long time Apple fans, but the Steve Job's era is over. This is Tim Cook's time and he is a supply chain genius. So, I say playing to his strengths is in Apple's best interest and moving now to leverage their advantage in buying quantity to pressure the coming tide of competitors is what needs to happen now.

I don't know about that. Yes the iPad is selling well, but the Kindle has gained some traction. A $299 iPad would pretty much stop it in its tracks. A $399 iPad will definitely help some but a $299 iPad 2 would turn the Kindle into a BB playbook...hard to sell, even at a loss. Amazon might have to resort to RIM's tactics and have them stolen from delivery trucks so they can collect the insurance money.

Actually that was going to be my point. Replacing high quality printed textbooks with stripped down digital versions is along the same path as dumbing down the education system which seems to be a trend. Swapping out chapters is a tedious task and is a hindrance to study for the final exam.

The problem is that iPad is not suitable for the task of delivering even middle school science textbooks of the same or better quality than the original printed ones as was advertised in the textbook keynote presentation.

Not realistic sums it up well.

Exactly and that's why I suspect they keep an iPad 2 for education and education normally gets special pricing. Frankly I'd like to see Apple really lower the price to schools especially in areas with low funding. What a great way to help education and sure up Apple's dominance for the next 20 years +.

What? I don't know why anyone would say this unless they added "if they have to accept razor thin margins" at the end.
Apple would *love* to own that market if they could make a decent product (if we are talking iPad 2 then that is a given) and if they can make a decent profit at it (of course, this is the question).

My thinking is that they would be willing to accept a thinner profit margin on an entry level tablet for two reasons: 1) The upsell factor. Many people will go to Best Buy after deciding to get the $349 iPad2 and get excited and end up with a more expensive model. $100 to double the storage does wonders for the profit margin. And 2) The ecosystem buy-in. The customer who buys a cheep iPad this year is the one who buys an expensive one next year. After collecting a hundred apps, are they really going to even consider switching to a windows or Android tablet? Almost every iDevice sold in the last 3 years has made a repeat customer out of the buyer. This stickiness is destroying competitors profits like never before seen in consumer electronics history!

I have no doubt Apple would like to dominate the market if they can do it right...

How about moving to 32, 64, 96 memory options? Assuming that there are no problems mixing different sized memory chips

Why do they have to be stripped down?

Worst case they are identical i.e. no interaction and with the same text and images (given text books are all in digital format these days for printing so that's a no brainer).

The next step is being almost the same only they get better with interaction and movies.

The last step is the really cool use of iBook's full potential which will come over time.

The great thing is even the worst case, (that being nothing more than a PDF would be made of the book) is that unlike a PDF it can be updated via the iBook Store. Just imagine a book automatically getting new data added is it comes known ... a country changes its name and your map updates! Automatic notes pointing out recent changes etc. It is Harry Potter magic for real.

This is a major improvement on printed books and if you can't see that then I have to call Luddite on you

I don't know why everyone concedes this point. Out of a relatively small sample at my workplace, I know several people who bought Kindles when they wanted iPads. They would not have bought a PlayBook or an Android tablet or even a Nook at any price. Had there not been the Fire, they would have gotten iPads. I cannot imagine that their numbers are insignificant outside of my workplace.
I'm not saying Apple has to match their prices or (God forbid) sell at a loss, but I am absoutely positive that the Fire cost Apple sales.

If Apple wanted to dominate that low margin market they would have targeted it already.

Screw that. I want this year's model at last year's prices.

@mknopp That's a lot HW that will be arriving but it's not any competition for the iPad yet.



If someone buying a Kindle Touch would not have bought an iPad it's neither a lost sale or keeping a sale by lowing the price to $299 (the suggested price for the iPad 2 I replied to).

I think the iPad 2 will drop to $399 for the 16Gb WiFI model. That should maintain their profit margin and attack more buyers.

The goal is to increase profit with doesn't mean that someone barely making a profit in your product category with a glorified eReader that can do some multimedia functions should be something you should directly compete with. So far Apple hasn't overreacted to cheap flash-in-the-pan gimmicks. Remember when they analysts said Apple needs to create a netbook or lose everything? They are the ones propping up the PC market. And speaking of: the Kindle Fire is to the iPad as the netbook is the Mac.



The Kindle Fire selling units is not an issue for Apple if it means that to compete they would lose profit. That's a fool's errand.

The Kindle Fire is more likely to get people to buy iPads than pull potential iPad buyers to the steroidal eReader. Because Kindle Fire buyers aren't likely to think an iPad is worth it they may find after using the Fire that the tablet platform is something they could enjoy if it was more complete and therefore consider buying the iPad for their next purchase whereas without the Fire they might have never considered it.



Check out the 9 paid books sometime. I think the Apple Stores might have some installed as demos. They are as good as printed material but offer interactive functions that add a level of learning not previously had. Something a teacher might take several minutes to explain can be understand quickly with the ability to see a model in 3D or watch how its motion works.

You guys are jumping to an extreme. There is no all or nothing scenario to worry about. You could have just one course with a digital textbook and have printed material for your other courses. Or publishers could have books that are exactly the same (page for page, except for minor corrections) so that students can choose the option that works best for them. It's silly to say that it will 10GB per book and to use one means you have to use 8 books. That's not how technology progresses.

Apple is the Ferrari of telephones. And Ferrari does NOT want their products in too many hands, because then it ceases to be indicative of membership in an exclusive little club.

I don't disagree but it just isn't Apple to retain an older product at a lower price (other for education or limited time only) when they have a newer one at the same price they used to sell the older one (OK I know rumors suggest a raise in price for iPad 3 but I don't believe that for the like for like replacements - maybe there is a new higher end version in addition).