The Apple rumor mill never rests, and the newest rumbling is that the company is preparing to release a new iPad model in the near future. This particular rumor isn't exactly the most exciting one, but it still has some implications for investors.
More art than science
9to5Mac has caught wind that Apple is about to add a new storage configuration to the fourth-generation iPad with Retina display and offer it with 128 GB of storage for the first time. Not only have developers begun noticing code in the newest build of iOS 6.1 pointing to such a device, but 9to5Mac's source at a "high-profile U.S. retailer" has also confirmed the move along with pricing information.
Following Apple's standard practice, it will charge an extra $100 for a bump up to the next storage configuration, which will result in this lineup.
iPad 4 with LTE
Sources: Apple and 9to5Mac. *Estimated.
Apple has perfected the art of overcharging for NAND flash in a way that consumers don't even mind. Adding incremental levels of storage costs Apple very little, yet it dramatically expands the functionality of the device from the user's perspective.
This will hurt you more than it hurts me
The fact that Apple may be considering adding a 128 GB model to the full-sized iPad lineup suggests several things. First, it may indicate that there is currently healthy demand for the 64 GB model, which carries the highest gross margin. A 128 GB model will carry an even higher gross margin, since the incremental cost of going fro 64 GB of NAND flash to 128 GB of NAND flash is nowhere close to $100.
It turns out that Samsung, one of Apple's numerous flash suppliers, just recently started mass producing 128 GB NAND chips destined for smartphones and tablets.
However, any upward pressure on average selling prices due to strong demand for the 64 GB model would be offset by the lower price points of the iPad 2 and iPad Mini, which are seeing strong demand and unit sales.
It's all about positioning
Perhaps more important, the addition of a 128 GB model says a lot about where Apple may position the full-sized iPad. The tablet market is in the process of segmenting between small (7-inch to 8-inch) and full-sized (9-inch to 11-inch) devices.
The small-sized segment is primarily dominated by the likes of Amazon.com's Kindle Fire HD, Google's Nexus 7, and the iPad Mini. This category of tablets is widely considered primarily consumption devices, since the smaller form factor makes it difficult to get real work done.
On the other hand, full-sized tablets are now trying to be considered viable alternatives for productivity machines like laptops. Apple has been trying to fight the perception that the iPad is "for consumption only" for years, and only recently have full-sized tablets achieved performance levels where they can be used for productivity.
Microsoft in particular is very interested in establishing a name for its Surface Pro as a laptop replacement for productivity users, which is due out next month. Surface Pro supports all legacy Windows applications since it runs on a familiar Intel chip, and is priced between Ultrabooks and Apple's MacBook Air.
Apple's addition of a 128 GB model could even be seen as a move upmarket and will still undercut the pricing of Surface Pro for prospective buyers in that market segment.
64 GB Price
128 GB Price
iPad 4 with LTE
Sources: Apple, Microsoft, and 9to5Mac. *Estimated.
Surface tablets have an advantage in productivity since they run Microsoft Office, which remains the standard productivity suite despite Google's inroads in that market with its Apps offerings. Microsoft may be about to shoot itself in the foot in that respect, since it's widely expected to be working on a version of Office for iOS.
Why it matters
What seems like a minor move by Apple to add a 128 GB storage option to the iPad could actually represent some opportunities in terms of slightly better iPad margins, higher average selling prices, and appeal to the productivity niche of the tablet market.
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The article Does This Newest iPad Rumor Matter for Investors? originally appeared on Fool.com.
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