Will Apple Drop the iPad 2 to $299?

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By ranina sanglap | January 6, 2012 2:17 PM EST

The iPad 3 rumor mill is at full tilt right now, with speculation running wild about the tablet's improved specs and when Apple Inc. will announce the next-generation tablet. But along with rumors about the iPad 3 there are also reports about what will happen to Apple's current tablet, the iPad 2.

According to a Digitimes source, Apple will continue selling the iPad 2, but at a much discounted price. Along with the iPad 3, which will be Apple's high-end tablet, the iPad 2 will be sold as the company's lower-tier product. Apple applied the same strategy when the iPad 2 was first released. It continued to sell the first-generation iPad, albeit discounted by $100 alongside the iPad 2, until the iPad units ran out. Currently Apple offers three iPad 2 models: $499 for 16 Gb, $599 for 32 Gb and $699 for 64 Gb. If Apple prices the iPad 3 at $499 the iPad 2 could be priced at $299 to make it more acceptable for the low-end tablet market.

Of course this is all speculation at this point, but analysts are wondering how a $299 iPad 2 could impact the market. A $299 iPad 2 will impact Amazon the most. Amazon's $199 Kindle Fire tablet is doing well, with Amazon claiming that it sold millions of units since the Kindle Fire debuted. With just $100 separating the Kindle Fire from an iPad 2, low-end users could opt for the more expensive Amazon tablet, with its better specs.

But would Apple still produce more iPad 2 units with a new iPad 3 on the shelves? The iPad 2 supply could be limited and there are rumors that Apple is already slowing down production of the iPad 2 in preparation for the iPad 3. Apple could just slash the price of the iPad 2 to move remaining units.

Amazon and Barnes & Noble shouldn't worry too much about a discounted iPad 2. Apple won't gain much by targeting the low-end of the tablet market. Amazon attracted consumers with its Amazon Kindle Fire because of its low price but it's doing so at a loss, sacrificing profit from the device to make the money back from app prices.  Apple would not use such a strategy. A cheaper iPad 2 would only threaten the more expensive iPad models. Amazon and other low-end tablet markets are safe for now.

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