The case for an iPad Pro

If Apple faces declining tablet sales, it will go upmarket and introduce a pricier iPad for business and professionals, argues analyst

Apple will move upmarket to an iPad Pro tablet, perhaps this year, as it faces pressure from Android device makers searching for profits, an analyst said today.

"iPad Pro" is the label some have stuck on the rumored release of a new tablet, potentially one with a screen larger than the current iPad Air's 9.7-in., and perhaps with a keyboard-cover accessory akin to those Microsoft sells for its Surface line of 2-in-1s.

The term has stuck because of the naming of the iPad Air, and the similar convention Apple uses to differentiate its MacBook Air and MacBook Pro laptop lines.

Sameer Singh, an independent analyst who covers technology on his Tech-Thoughts website, speculated that Apple will launch an iPad Pro aimed at businesses.

He based that assumption on the rapid increase in sales of Android tablets to users he categorized as "low-end consumers" and "mid-range consumers," groups where price is important if not paramount. Apple has been successful in other pools of buyers, "high-end consumers" and "enterprise," said Singh, because of its decision to not compete on price with lower-cost Android tablets.

As evidence, Singh pointed to the pricing of the 7.9-in iPad Mini, which cost $329 and up in its first iteration -- reduced to $299 last October -- and $399 and up in its current Retina display-equipped configuration.

Those prices are higher than similar-sized tablets running Android from multi-national brands, such as Samsung, Google and Amazon, which sell their respective Galaxy Tab 3, Nexus 7 and Amazon Fire HD tables for $299, $229 and $184.

But as those vendors -- especially Samsung, which cannot sell its tablets at or below cost as can Google and Amazon -- are pushed out of the lower-margin markets by cutthroat competitors willing to accept even less profit, they will head toward the high-end consumer space, predicted Singh.

"This is inevitable because branded vendors are facing increasing margin pressures from regional brands and white box competitors in mid-market tiers," Singh wrote on Tech-Thoughts Thursday.

Because Apple declines to go downmarket, its only choice is to go upmarket to even pricier tablets aimed at buyers with deeper pockets.

It would make the move to an iPad Pro if sales of its current lineup began to stagnate or fall, Singh said.

"In the past, Apple has had to deal with falling market share," he said in an email reply to questions today, adding that it has been sanguine about its shrinking share of tablet sales. "But it has never faced the threat of declining sales, at least in the mobile era. So, if Apple [does] face a decline, my bet is that it will choose to go upmarket rather than cut prices and attempt to move down."

There's evidence to support Singh's argument.

Not only has Apple refused to play the rush-to-the-bottom pricing model used by most PC makers -- its new Mac Pro starts at $2,999 -- but last year it priced the iPhone 5C considerably higher than most analysts claimed were necessary to compete with the flood of home-grown Android smartphones sold to China's consumers.

Instead, some argued, Apple used the iPhone 5C pricing, as well as the features of the flagship iPhone 5S, to reinforce its reputation as a luxury, aspirational brand that people are ready to pay extra to acquire.

If Apple does go upmarket with an iPad Pro-style tablet, it would be following in the footsteps of rival Microsoft, which has targeted its Surface Pro and second-generation Surface Pro 2 at the enterprise and professional market. Microsoft sells the least-expensive Surface Pro 2 for $899, with an additional $80 for the lowest-cost keyboard cover, for a minimum total of $979.

An iPad Pro might have a larger screen -- rumors have focused on 12 inches, about the size of the display in the lowest-priced MacBook Air -- perhaps ports for connecting external peripherals, maybe a keyboard-cover accessory to use with productivity software such as iWork, or if Microsoft eventually releases touch-based Office apps for iOS, for that enterprise-standard suite.

By going upmarket, as Singh suggested, Apple would also charge more for such a tablet to both separate it from the iPad Air (which starts at $499) and maintain its traditionally high margins. But even at $200 or $300 more than the current iPad Air, Apple could undercut the Surface Pro 2.

By comparison, Apple prices its entry-level 13-in. MacBook Pro with a Retina display $200 higher than a MacBook Air equipped with a same-sized screen, and $300 more than the least-expensive 11-in. MacBook Air.

Other factors have been cited that may make an iPad Pro possible, though not predicted. Many have pointed out, for instance, that Apple's move to 64-bit in its A7 system-on-a-chip (SoC) for the iPhone 5S and the newest iPads opens the window for more sophisticated apps.

But nothing is certain until Apple shows something on a launch presentation stage. Singh acknowledged that the Apple prediction business is littered with bets that never materialized.

"I know how product launch predictions usually turn out, so I wouldn't necessarily bank on it," he said.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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