Apple may be "nimble" on its price point for the upcoming iPad tablet PC, according to Credit Suisse analyst Bill Shope, if customers refuse to flock to the device during its initial rollout within the next two months.
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 cannibalization between the iPad and similar touch-screen 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 cannibalization 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 some two months after the device's release. Apple later extended store credit to early adopters who had paid the iPhone's initial $599 price.
Immediately following its Jan. 27 unveiling of the device, Apple listed a variety of price-points for the iPad based on options. The 16GB version will cost $499 with Wi-Fi, and $629 with Wi-Fi and 3G. The 32GB version will cost $599 with Wi-Fi, and $729 with Wi-Fi and 3G. The 64GB version will cost $699 with Wi-Fi, and $829 with Wi-Fi and 3G.
Rumors 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 with another price cut rumored 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 Jan. 27 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 center, 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.
Apple CEO Steve Jobs was reportedly in New York City Feb. 3 to discuss the iPad's capabilities with high-ranking executives from The New York Times. Jobs, wearing what was described by New York magazine's anonymous source as "a very funny hat," apparently demonstrated the device for Times publisher Arthur Sulzberger Jr. over dinner at Pranna, a high-end restaurant near Madison Square Park.