While the news of a 7-inch iPad mini wasn't much of a surprise at Apple's San Jose event this week, some pundits were shocked by the price.
The new 7.9-inch tablet has a starting price of $US329/£269/AUD$369, which is a significant increase over the starting price of tablets like the Nexus 7 ($US199/£129/AUD$249) or Amazon Kindle Fire HD ($US199).
In an interview with Reuters, Apple's marketing guru Phil Schiller defended the decision to price the 7.9-inch version of the iPad at the higher price, claiming that because customers were already paying for the iPad 2, the cheaper price would be appealing.
Article continues below
"The iPad is far and away the most successful product in its category. The most affordable product we've made so far was $US399 and people were choosing that over those devices. And now you can get a device that's even more affordable at $US329 in this great new form, and I think a lot of customers are going to be very excited about that," Schiller told Reuters.
Good for the bottom line
One aspect of pricing Schiller doesn't mention is how much money Cupertino is planning to make off the sale of each iPad mini sold.
We know that Apple enjoyed a 37 per cent profit margin on the original Retina Display iPad 3, so it's not impossible to expect the company to maintain similar margins for the iPad mini.
Conversely, both Amazon and Google are selling their devices with the narrowest of profit margins, hoping that locking customers into related software and services will allow them to make up the profit lost in hardware sales.
With more than $100 billion in the bank, Apple can afford to sell the iPad mini at a loss and still come out on top of the tablet market.
But it's obvious that Apple thinks it doesn't need to sell the iPad mini any cheaper in order to shift stock.
Like previous versions of both the iPad and the iPhone, Apple is expecting demand to outweigh supply in the early months, regardless of the higher price.
And we're betting they're probably right.