Apple plans smaller, cheaper iPad to take on Google's Nexus 7

Apple plans to debut a smaller, cheaper iPad by year-end to help maintain its dominance of the tablet market, two persons with knowledge of the plans said.

Apple plans to debut a smaller, cheaper iPad by year-end to help maintain its dominance of the tablet market, two persons with knowledge of the plans said.

The new model will have a screen that is seven to eight inches diagonally, less than the current 9.7-inch version, said the sources who asked not to be identified. The product, which Apple may announce by October, will not have the high-definition (HD) screen featured on the iPad that was released in March, said one of the sources.

A smaller, less expensive iPad could undercut the ambitions of Google, Microsoft andAmazon.com to gain traction in the advancing tablet market, said Shaw Wu, an analyst at Sterne Agee & Leach.

The new device will probably have a price closer to Google's Nexus 7 tablet and
Amazon's Kindle Fire, both of which have 7-inch screens and cost $199. "It would be the competitors' worst nightmare," Wu said in an interview . "The ball is in Apple's court."

Since the iPad went on sale in April 2010, Apple has dominated the tablet market, which is predicted by Display-Search to reach $66.4 billion this year. Apple has 61% of the market, according to research firm Gartner.

Apple's rivals are eager to gain a toehold. Google said on June 27 that it will sell a tablet-style device called the Nexus 7.

Earlier in the month, Microsoft announced a tablet called Surface that will have a similar screen size as the current iPad. Amazon's Kindle Fire was released last year. The entrants' best chance of success has been to focus on markets where Apple had no toehold, said Jan Dawson, an analyst at Ovum.

The Surface comes in two models that are most likely to appeal to buyers who want to continue using Microsoft's Windows software, Dawson said. While Microsoft has not disclosed pricing or timing for either, the higher-end version will probably be pricier than the iPad and targeted more at an emerging class of laptop PCs called Ultrabooks, he said.

The latest iPad ranges in price from $499 to $829. Google's Nexus 7 could stack up well against Amazon's Kindle Fire, which went on sale in November.

The Nexus 7, manufactured by Asustek Computer, has a faster processor and better battery life than the Kindle Fire, as well as a front-facing camera. Still, competing with a lower-priced iPad will be more challenging, Wu said. Apple benefits from having more than 225,000 apps that have been tailored specifically for the current iPad.