Experts argue over merits of 7-in. iPad

Reports spur analysts to disagree whether a smaller tablet's smart

Analysts split today over reports that Apple may be readying a smaller iPad for launch later this year.

According to a story published Tuesday in Taiwan's Chinese-language Economic Daily News financial newspaper, Apple is prepping a 7-in. iPad for a holiday launch later in 2010. The newspaper cited sources that said several Taiwanese component makers have won contracts for a smaller iPad.

IDG News Service reported on the Economic Daily News account earlier Tuesday.

Last week, DigiTimes, an English-language IT publication also based in Taiwan, claimed that component manufacturers were preparing for a smaller iPad to be launched in early 2011. The new model would have a screen in the 5-in. to 7-in. range, said DigiTimes, and would be priced under $400.

But a pair of U.S. analysts disagreed on whether Apple would add to its iPad lineup by shrinking the current model.

"If they can find 7-in. screens where they can't find 9.7-in. screens, it would let them have a larger sell-through," said Ezra Gottheil. Last month, an Apple executive said the company is "selling every iPad unit that we can make," but the tablet remains backordered, with shipping delays of between three and five business days on Apple's online store.

By Gottheil's logic, if Apple could get its hands on more screens, no matter what the size, they could sell more tablets.

Apple sold 3.3 million iPads in the first three months of the tablet's availability.

"Secondly, a smaller screen would give them the ability to knock a few dollars off the price," added Gottheil. "If they could drop it by $100, they could make it more of a holiday gift."

A lower price -- the current iPad starts at $499 -- would also put it closer in price to the recently reduced e-readers from Amazon and Barnes & Noble. The former's next-generation Kindle, which ships Aug. 27, is priced at $139, $10 under B&N's least-expensive Nook.

Apple would probably have to strip out some components and drop features to make a $400 price for a 7-in. iPad if it wanted to maintain the estimated 40% margin on the larger model, said Brian Marshall, an analyst with Gleacher & Co.

But Marshall doesn't see the need for a petite iPad.

"They have such a good lineup now, there's no void and they cover every price point," Marshall said, pointing to the iPhone 3GS, now discounted to $99; the iPhone 4 and iPod Touch lines that start at $199 and run to $399; and then the current iPad, which costs between $499 and $829.

"I just don't see any holes in their portfolio that they need to fill," Marshall said.

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Gregg Keizer

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