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Steve Jobs Was Wrong: The 'iPad Mini' Could Destroy Every Other Tablet Maker


If the reports of a sub-8-inch iOS tablet turn out to be true, Google, Amazon, Microsoft, and every single tablet manufacturer might as well throw in the towel.

MINYANVILLE ORIGINAL Though the many leaks of future Apple (AAPL) hardware on Chinese blogs that end up on websites like MacRumors and AppleInsider should be taken with a grain of salt, the mainstream press is giving a little credence to rumors of a future iPad with a smaller form factor.

The Wall Street Journal and Bloomberg are reporting that Apple is working on a tablet that will be have a screen smaller than eight inches. This might sound like it isn't a game-changing difference from the current 9.7-inch iPad, but it opens it up to a whole new market that is currently dominated by e-readers and Android-powered tablets.

The iPad is great on your couch, but doesn't quite fit in a purse. And even at the relatively cheap cost of $399 for the older iPad 2, it really pulls on most people's purse strings. The size of the iPad also makes it a bit cumbersome and awkward for taking photos and playing games. The people who are buying Android tablets today are not iPad customers.

The first-mover advantage that the iPad has is only one reason why any Android tablet with a similar price tag can't compete. Ten-inch tablets that don't happen to be iPads have been duds. Some of the most successful ones have been the smaller, cheaper ones like the Amazon (AMZN) Kindle Fire and the Samsung (SSNLF) Galaxy Tab. Google (GOOG) just unveiled a highly acclaimed seven-inch tablet, the $199 Nexus 7, which will be manufactured by Asus.

So far, it seems that the only way to sell non-Apple tablets is to forget about making money off the hardware directly. A full 37% of the iPad's price is pure profit for Apple. The Nexus 7 and the Kindle Fire, by contrast, just barely break even. At the same $199 price point, the Nexus 7 costs $184 to produce and the Fire costs $153, according to UBM TechInsights. The same estimates show the $499 iPad costing just $278 to produce. Google and Amazon make money off of users after they download applications and media from their online stores. And Apple does that, too.

An iPad Mini should also cause some discomfort in Redmond. Microsoft's (MSFT) ARM (ARMH)-based laptoppy-tablet thing, the Windows RT Surface, will probably have a harder time of making sense to customers. Android's app ecosystem is definitely smaller than the iOS App Store, but leaves little to be desired. Windows RT is not compatible with all of the Intel (INTC) x86 applications in the wide Windows platform. An x86 version of the Surface is expected to come soon after the ARM-based one.


Ironically, Steve Jobs once railed against any type of tablet computer with a smaller screen than the iPad. Jobs clearly didn't want his company to wade in the lower-tier of the tablet market. Here's Jobs in 2010:

One naturally thinks that a seven-inch screen would offer 70% of the benefits of a 10-inch screen. Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a seven-inch screen is only 45% as large as iPad's 10-inch screen. You heard me right: Just 45% as large.

If you take an iPad and hold it upright in portrait view, and draw an imaginary horizontal line halfway down the screen, the screens on these seven-inch tablets are a bit smaller than the bottom half of the iPad's display. This size isn't sufficient to create great tablet apps, in our opinion.

While one could increase the resolution of the display to make up some of the difference, it is meaningless unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one-quarter of their present size.

Apple has done extensive user testing on user interfaces over many years, and we really understand this stuff. There are clear limits of how close you can physically place elements on a touchscreen before users cannot reliably tap, flick or pinch them. This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.

Third, every tablet user is also a smartphone user. No tablet can compete with the mobility of a smartphone. Its ease of fitting into your pocket or purse. Its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in their pockets is clearly the wrong trade-off.

The seven-inch tablets are tweeners: Too big to compete with a smartphone, and too small to compete with an iPad.

Steve Jobs has been wrong before. He was the one that insisted on calling the iMac the "MacMan." Fred Wilson, the superstar venture capitalist at Union Square Ventures, posted his feelings about the Nexus 7 on his blog today, saying that seven inches is "an ideal form factor for tablets." Surely many consumers will agree. IHS iSuppli estimates that the iPad held 62% of the tablet market last year, but expects the share to jump to 85% this year on the heels of the third generation iPad. An announcement of a smaller iPad could throw a lot of cold water on sales of competing tablets like the Fire, as consumers anticipate the more affordable and portable tablet experience that they want.

Apple under Tim Cook can get past Jobs' stubbornness and dash the competition's hopes of being more than an also-ran in the tablet game.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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