Facing increasing competition, notably from Amazon's Kindle Fire, and fading demand, Apple is being urged to drop the prices on its iPad, analysts said.
Bill Shope, an analyst with Goldman Sachs, wrote in a note to investors that demand for the iPad is lessening and could be solved with lower pricing. From Business Insider Shope continued:
Price cuts have also been critical, and the iPad is overdue. While the rapid ramp of the iPad installed base is remarkable by any metric, it is even more remarkable when we consider the fact that it has occurred without any change in pricing or storage capacity. Indeed, the iPhone enjoyed several major retail price cuts in its first year. The 8Gb version of the first iPhone saw its retail price slashed from $599 to $399 in its first three months on the market. Apple further improved affordability with the shift to a subsidized pricing model in 2008, bringing the price for an 8Gb iPhone down to $199 (with a two-year contract).
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Shope said that a $399 iPad 2 could limit Android tablet domination and attract cost-conscious consumers even in a recession. But so far, despite rumors, Apple seems unwilling to drop $100 even for a pared-down model.
Bill Reitzes of Barclays Capital also pointed out that sales were 600,000 less than analysts predicted for Apple's fiscal fourth quarter, possibly indicating weaker sales and that the computer tablet field could be more open than first thought.
Enter Amazon's Kindle Fire, the $199, 7-inch Android tablet it released this week. While most critics agree that it compares less favorably than the iPad, the $199 price tag makes it easy to compromise.
"The Kindle Fire can handle about 80 percent of what I want to do on an iPad, for 40 percent of the price. And much of what's missing won't be missing for long," wrote Wilsom Rothman for MSNBC.
For the price of an iPad 2, consumers can get two Kindle Fires and have money left over for several e-books or applications. In the coming holiday season amid a devastating recession, the choice between the two will be clear to many buyers.
This move should be having Apple quaking in its boots, but so far the tech company has been slow to react to the changing market. While resting on its laurels is understandable, it shouldn't be the route of an innovative tech company. Apple needs to move quickly and produce a lower-priced tablet to compete in the global market.