Apple Using IPad to Boost Rivalry With Google-Led Tablet Makers - Businessweek

Apple Inc. (AAPL) is taking the wraps off a smaller iPad today, betting that a less expensive version of its tablet computer will help the company fend off competitors including Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN) and Google Inc.

Apple, the most valuable company, will unveil the iPad at an event that starts today at 10 a.m. local time in San Jose, California, people with knowledge of the matter have said. The device will have a 7.85-inch screen diagonally, compared with the 9.7-inch screen of the current iPad, said the people, who asked not to be identified because the computer isn’t public.

Almost three years after the introduction of the iPad, Cupertino, California-based Apple controls about 70 percent of the tablet market, and no other tablet maker has amassed more than a 10 percent share, according to IHS ISuppli. Chief Executive Officer Tim Cook may charge as little as $249 for the smaller device, Barclays Plc analysts predict, a price that would help him woo bargain hunters who might be lured by Amazon’s Kindle or Microsoft’s newly unveiled Surface.

“There are two tablet markets: iPad and everybody else,” said Carl Howe, an analyst at Yankee Group in Boston. “It’s been tough going for anybody who is not Apple.”

Apple has sold more than 84 million iPads since co-founder Steve Jobs introduced the device in January 2010, creating a market among consumers, businesses and schools looking for a gadget that blends the features of a laptop with the mobility of a wireless phone. With the addition of another model at a different price, Apple is mimicking the strategy it used to make iPod the world’s top-selling media player, Howe said.

Apple rose 4 percent to $634.03 yesterday in New York. Through yesterday, the shares had risen 57 percent this year.

Mac Update

The company may also introduce an update to its iMac desktop computers and a new 13-inch MacBook Pro with a high- definition screen, Howe said.

Apple and its competitors are jockeying for share in a tablet market that, according to NDP DisplaySearch, will more than double to $162 billion in the next five years.

Apple may sell 5 million to 7 million of the smaller iPads by the end of the year, according to Brian White, an analyst at Topeka Capital Markets. The new model may have a starting price of $250 to $300, White wrote in a research note yesterday.

Aside from price, another advantage for Apple is the connection to the iTunes music store and the App Store, the online bazaar that boasts more than 250,000 tablet-friendly applications.

“People can pick up an iPad and within minutes of opening the product have all their content on their new device synchronized through iTunes,” said Chris Jones, an analyst at Canalys.

Portable Appeal

A smaller iPad also may entice customers who want a computing device that’s easier to use on the go, said Sarah Rotman Epps, an analyst at Forrester Research. (FORR) She estimates that about half of the time people spend with a tablet is in the living room or bedroom.

“It could be that a smaller, lighter iPad will be more portable and will appeal to a wider segment of customers,” Epps said in an interview.

A lower price also will undercut a selling point of Amazon, Google and Barnes & Noble Inc. (BKS), which have tried to win over customers by charging less than the iPad’s $499 starting price, Epps said.

Introducing a smaller iPad is a reversal for Apple. Jobs, who died last year, said customers wouldn’t like having less screen space.

“This size isn’t sufficient to create great tablet apps, in our opinion,” Jobs said in 2010 of 7-inch tablets.

Cue’s Correspondence

Documents released earlier this year as part of Apple’s patent lawsuit against Samsung Electronics Co. included an e- mail from Apple Senior Vice President Eddy Cue discussing efforts to convince Jobs of the need for a smaller tablet.

Apple’s introduction of a smaller iPad is one of several events in the coming week as companies look to get new wares on store shelves before the holiday shopping season. Microsoft is introducing its newest Windows operating system on Oct. 26, and Google Inc. (GOOG) is due to unveil a new version of its Android software for mobile devices before the end of the month.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net