Nov. 14, 2011 at 6:26 PM ET
While the Kindle Fire and Nook Tablet are no match for an iPad, pound for pound, their lower pricing means they provide as much of the value, dollar for dollar. There is competitive and economic pressure on Apple to drop the price of the iPad by $100 or more. And far from being anathema for the profit-driven tech giant, a well-timed price cut is directly in line with Apple's iPod and iPhone strategies.
Business Insider cited a report by Bill Shope, an analyst at Goldman Sachs, forecasting "near-term demand challenges" for the iPad. iPad sales were good but not great this past quarter, and though they might see a bump in the holiday buying season, Shope says Apple needs to do three things: Continue to push the iCloud platform, add the addictive Siri voice assistant to the iPad and drop the tablet's pricing.
There's precedent for this, as Shope and anyone else who's watched Apple for the last 10 years can tell you. The iPods saw substantial price drops year over year, as features improved and hardware evolved. The iPhones, though they follow a different pricing model because of carrier subsidies, also came down fast from their initial, punitively high cost.
The iPad was safe at $499 as long as Android hardware rivals were charging even more for inferior hardware, and drew no real attraction from the masses. The conventional wisdom until now has been, "People don't want tablets, they want iPads." But Amazon and Barnes & Noble are a lot better than other Android hardware makers at explaining why people should own a tablet, and the fact that their wares are priced from $199 to $249 only adds to the pressure.
But bear in mind, Amazon and Barnes & Noble are selling 7-inch tablets, and there's a valid premium to be paid for double the screen size, which is what you get with an iPad. To add to the stress for Apple's accounting department, Amazon will eventually release a competing 10-inch tablet. Because the Kindle Fire is just $199, a 10-incher could possibly be as low as $299.
So when will the inevitable iPad price cut hit?
My guess is, of course, this spring, assuming that's when Apple chooses to launch iPad 3. My current pet theory — though I stress it's just a theory — is that Apple will release an iPad with a microscopic-pixel Retina display similar to the iPhone for $499, and then sell a basic 16GB-only version of the current iPad 2 for $399. Goldman's Shope says Apple could even strip their iPad 2 down to 8GB, keeping costs low enough to really crush competitors and "further accelerate Apple’s already impressive momentum in emerging regions such as China.
What would be cool as all get-out, albeit a little less logical, would be if the top of the line started at $399, and the budget model was $299, but I don't think that will happen this early. Whatever happens, it's highly unlikely that a price slashing will occur before Christmas. Apple just doesn't play that game.
More on the iPad and its competitors from msnbc.com: