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The New Apple Inc. iPad Strategy Is Sneakier Than You Think

The new iPad costs less than the iPad Air 2, but there are tradeoffs. In fact, now it's more expensive to buy an Apple tablet.

new iPad - The New Apple Inc. iPad Strategy Is Sneakier Than You Think

Source: Apple

Yesterday, Apple Inc. (NASDAQ:AAPL) announced a new iPad — called simply “iPad” — that replaces the iPad Air 2 in its line-up. On the surface, it sounds like a solid upgrade, with a faster CPU than the aging Air 2 and a $70 price drop.

The New Apple Inc. iPad Strategy Is Sneaky, But Smart
Source: Apple

Look deeper, though, and AAPL’s consumer tablet strategy is a little more calculating than “faster and cheaper.”

New iPad is Faster Than iPad Air 2, But …

Apple’s aging iPad Air 2 was released in 2014 and powered by the A8X chip. While blazing fast at the time of its release, it’s getting a little pokey now, especially with processor-intensive apps like games.

The new iPad that Apple announced on March 21 is equipped with the A9 CPU, which first showed up in the iPhone 6S in 2015. According to AAPL, the A9 represented a significant 70% processing boost and 90% graphics improvement over its previous generation chip. So the iPad should see a considerable performance improvement over the iPad Air 2 it replaces.

However, a closer look at the specs show that the new iPad is actually thicker and heavier than the model it replaces.

Considering the big deal that Apple typically makes about its tablets getting thinner with every generation, an upgrade that means going from 6.1mm thick and 0.96 pounds to 7.5mm thick and 1.03 pounds might be off-putting. Especially for those consumers who have upgraded every year to ensure they have the best iPad, watching each new purchase get progressively thinner and lighter.

More problematic than the size is the display. The new iPad has a high resolution Retina display, but it loses the lamination and anti-reflective coating the iPad Air 2 featured. This is a step backward and as The Verge points out, for those who use a tablet primarily to read or watch movies, the old iPad Air 2 with its superior display is going to offer a better user experience.

New iPad is Cheaper Than iPad Air 2, But…

Competitors like Amazon.com, Inc. (NASDAQ:AMZN) have hammered at consumer tablet prices. Apple is setting the entry price for its full-sized, new iPad at $329. That’s considerably less than the $399 iPad Air 2 it replaces, although still pretty far from Amazon’s $49.99 Fire Tablet.

However, the new iPad actually has the effect of raising the minimum amount needed to buy a new iPad from Apple.

How does this math work?

It’s not the iPad itself, the issue is that when AAPL introduced the new model, it not only dropped the iPad Air 2, it also dropped the iPad Mini 2. As a result, the cheapest tablet current offered by Apple is that new iPad at $329, instead of the iPad Mini 2 at $269.

So Who Is the New iPad Aimed At?

Apple’s consumer iPad strategy seems a little confusing at the moment.

AppleInsider has a theory that makes sense, though. It suggests the iPad isn’t aimed at iPad Air 2 owners so much as it’s intended to convince the 30% of iPad owners that still own second-, third- and fourth-generation models to upgrade.

Many people have been holding onto these older iPads (released from 2011 through 2012) because they’re “good enough” and an upgrade was too expensive. But they don’t run current software and their batteries will be failing. They also lack Touch-ID, which the new iPad offers. The new model will be a serious upgrade for these hold-outs, and even in its chunkier form factor it will be much lighter and thinner than what they currently own.

The $329 price for a full-sized, current generation iPad may be enough enticement to push them to open their wallets.

What about iPad Air 2 owners? Those who just want a more powerful, full-sized tablet can upgrade to the new iPad. Those who want a speed boost without giving up display quality or the sleek form factor they’re accustomed to will be steered to the more expensive 9.7-inch iPad Pro.

That still leaves bargain tablet shoppers out of the picture, but AAPL was never going after that demographic. The $269 iPad Mini 2 was an attempt to offer an affordable tablet and the $329 iPad now fills that slot. If the higher price tag scares away a few shoppers so be it.

It seems more likely that it’s that big group of older iPad owners AAPL is really going after, along with any tablet shoppers looking for a premium — yet relatively affordable — Apple experience.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/apple-inc-aapl-stock-sneaky-new-ipad-strategy/.

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