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What's All the Hubbub About Over the iPad Mini Pricing?

 

What was all the hubbub about over the Apple (AAPL) iPad Mini’s pricing of $329? I am talking about its base 16 gigabyte model I guess that traders and analysts expected the pricing to come in at $299 in order to be somewhat more competitive with Amazon (AMZN) Kindle’s price tags. Which Kindle is the Mini supposed to compete with?  The 7 inch Fire HD model for $199 or the Fire HD 8.9 inch which sells for $299? I am sticking with wi-fi only models for comparison. The Mini has a 7.9 inch screen and the iPad4 has a 9.7 inch screen. I would guess that we have to compare the 7 inch fire with the 7.9 inch Mini, So let me get this straight…. the expected price of $299 was to be highly competitive with $199 in the minds of analysts and traders? When you analyze it this way, it sounds ridiculous. So, what is the big deal between $329 and $299? I will tell you what –the 7 inch 16 gigabyte Samsung Galaxy sells for $349. That’s the real competition if you ask me. In the end, $329 means better margins for Apple while being cheaper than Samsung. 

Apple it appears is going the route of Macy’s (M). Macy’s sells moderately priced brands and luxury brands. They will leave the lower margin off-priced brands to the discounting competition. Apple is trying to capture the mid-market for tablets. It already has the high-end market which was enhanced with the upgraded iPad4 model. Apple has now created a middle tier alternative. If you ask me, the decision is now much easier – you can get an Apple product at $329 or $499 or go for the competition at $349, $299 or less. 

Amazon sells it Kindle products at cost. They are now backed into a corner. If they raise their prices in an attempt to make money, then the iPad Mini looks more attractive. Otherwise Amazon can keep on selling what many consumers believe is an inferior product and fail to make money. Perhaps Amazon believes in the razor and razor blades concept for the mobile computing market. Apple knows better. It can make money on both the razor and the razor blades. 

 

DisclosureAt the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL and M stock — although positions can change at any time.

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

You can access more daily commentary from Scott Rothbort, on  Wall Street All-Stars

Scott is also a Senior Advisor to AAPLTrader

 

 



Posted By Scott Rothbort at October 23, 2012
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Scott Rothbort

About Me :

SCOTT ROTHBORT

THE FINANCE PROFESSOR

 

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational website TheFinanceProfessor.com and a frequent contributor the TheStreet.com where he also writes a weekly article as The Finance Professor

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com.

 


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