Apple May Drop iPad Pricing, Suggests Analyst

With Apple reportedly facing end-user uncertainity for its iPad device, Credit Suisse analyst Bill Shope has suggested that Apple may be “nimble” on its price point, if customers refuse to flock to the device during its initial rollout.

Shope met with Apple executives about the device sometime last week, and came away reporting – perhaps unsurprisingly – that the company believes there will be a relatively low rate of cannibalisation between the iPad and similar touchscreen devices, including the iPod Touch and the iPhone.

“Apple wants the iPad to be the best device for a few key use cases,” Shope wrote in a note, excerpts of which have appeared on The Wall Street Journal’s blog. “This clear segmentation of capabilities suggests that cannibalisation may be less of a concern than most currently believe.”

But Apple executives are apparently willing to lower the price point for the iPad if the device fails to gain traction in the market. That would be similar to Apple’s decision to slice the price of the iPhone by $200 (£128) some two months after the device’s release. Apple later extended store credit to early adopters who had paid the iPhone’s initial $599 (£384) price.

Immediately following its 27 January unveiling of the device, Apple listed a variety of price-points for the iPad based on options. The 16GB version will cost $499 (£320) with Wi-Fi, and $629 (£403) with Wi-Fi and 3G. The 32GB version will cost $599 (£384) with Wi-Fi, and $729 (£467) with Wi-Fi and 3G. The 64GB version will cost $699 (£448) with Wi-Fi, and $829 (£531) with Wi-Fi and 3G.

Rumours of a price drop may drive customers to wait for an actual price drop rather than purchase an iPad immediately upon release, making the Apple executives’ reported comments into a self-fulfilling – and ironic – prophecy. Even without reductions, those price-points are lower than for a number of Apple products, specifically the company’s traditional PCs. Nonetheless, they represent a substantial markup from competing devices such as Amazon.com’s Kindle, which currently markets for $259 (£166), with another price cut rumoured to be in the works.

The iPad’s higher price point has been seen as a potential competitive disadvantage by some analysts, at least within the e-reader segment. “IPS offers a better viewing angle than traditional LCD technologies,” IDC analyst Susan Kevorkian wrote in a 27 January research note, referring to the iPad’s screen, “but is not any better than other LCDs outdoors, and its backlighting can induce discomfort from eyestrain, something that Kindle has hedged against with its E Ink display technology.”

Apple seems to intend the device as an all-around multimedia centre, though, and a filler of the gap between smartphones and traditional PCs. Its ability to display book and periodical layouts with complicated layouts and colors intact, as opposed to e-reader’s monochromatic display, has been seen by some segments as a major factor in both its competitive strength against other companies and its ability to appeal to publishers.