ipad price cut sparks war.
Nicholson THERE’S a price war brewing over tablet computers and it does not involve Apple’s new ipad.
While retailers fought to offer the biggest discounts at the tablet’s recent launch, a bigger monetary battle is emerging that could decide the fate of the industry.
Analysts have labelled Apple’s decision to lower the price of its ipad 2 a ‘‘ masterstroke’’ and a move that could have wider implications for its competitors.
Apple’s entry- level tablet now costs less than $ 400 in some stores, a price cut Gartner research vice- president Van Baker says could see its rivals rethink current prices and should see Google seek to enhance its tablet appeal.
There’s little doubt Apple’s third ipad is making an impact on tablet sales.
Australian pre- orders sold out before its launch, pushing delivery dates back by up to three weeks.
Piper Jaffray analyst Gene Munster predicted the company would have sold more than one million on its first day on sale and research firm Canaccord Genuity revised its annual ipad sales estimates upwards.
The company predicts Apple will sell 65.6 million ipads this year, up by 10 million.
‘‘ We believe Apple has extended its leadership position in the fast- growing tablet market,’’ it forecast in a note to investors.
‘‘ We believe the new ipad has raised the bar relative to competing tablets.’’
But a close second to the impact of the new ipad is the price of the old model.
When revealing the new gadget, Apple announced it would continue to sell the ipad 2 at a reduced price, starting from $ 429, an overnight reduction of $ 150.
Further discounts by retailers including Big W and Dick Smith have put the tablet computer under the $ 400 mark for the first time.
Telsyte research director Foad Fadaghi says the lower price is likely to attract many new customers, from first- time tablet buyers to those upgrading from older models.
It could have an even greater impact on Apple’s competitors, Fadaghi says, who could now be led into a price war.
‘‘ It’s a masterstroke, really, because it ensures Apple gets the maximum amount of value from an existing model, even though it’s outdated, and it really hurts the competition,’’ he says.
‘‘ Now rivals really have to counteract Apple’s move with price drops. At this rate, we could see some very low- priced devices, maybe even older models that come down to a $ 150 price point.’’
Fadaghi says Australian tablet buyers have already proven to be very price- sensitive, many opting to invest in entry- level versions of advanced tablets or bargain devices.
‘‘ Telstra has proven that there is a place for low- priced tablets with their T- Touch Tab,’’ he says.
‘‘ By its own admission it was not a terribly good product but it sold because of its [$ 299] price point.
‘‘ People are not thinking about using a tablet like that for two years and they’re not worried about the effect on their budget. It becomes a discretionary item.’’
Gartner’s Baker says the price cut sends a simple message to Apple rivals: ‘‘ If you’re going to compete with us you’re going to have to match us on price.’’
Many new Google Android tablets, including models from Motorola, Sony and Samsung, have been launched with prices over $ 700, matching the ipad 2’ s old price but not its new cost. But that could change.
Baker predicts Google Android tablet makers will lower prices to meet the market, but he says the future for Apple’s rivals could be in the cheap range dominated in the US by Amazon and its $ US199 Kindle Fire.
‘‘ Amazon chose to make a smaller, cheaper device that appeals to a different segment of the market, so it’s only slightly competitive with the ipad,’’ he says.
In addition to price cuts, Baker says rival tablets will also need more full- screen apps to compete with Apple, and Google may need to pitch in to build the platform.
‘‘ We’re in a bit of a chicken- or- the- egg situation right now with Android tablets because developers don’t want to build apps for Android if there is no install base and people don’t want to buy an Android tablet if there are no apps to install on it. The only entity who can do anything about that is Google,’’ he says.