Apple Inc. (Nasdaq:AAPL) is the company to beat right now in the technology sector, that much is clear. For the past few years, the Cupertino-based firm has demonstrated incredible growth in sales revenue and market capitalization. Much of that success was driven by the success of the iPad, one of Apple's major product lines. However, tablets released by Google (Nasdaq:GOOG) and Amazon (Nasdaq:AMZN) (and soon Microsoft (Nasdaq:MSFT)) continue to chip away at Apple's market share. Apple's response to these more affordable options is the iPad Mini.

Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.

Market Warfare
In the technology sector, the balance of power can shift remarkably quickly. As reported in Q3 of 2008, Nokia (NYSE:NOK) held the majority of smartphone market share with a 42.4% rating. By the end of Q2 in 2012, Nokia's piece of the pie had fallen to a mere 4.4%, with Google's Android dominating at a 68% market share. Accordingly, competition in the sector is vicious; massive lawsuits over patent infringements have become its hallmark, spurring companies to gobble up as many patents as they can. For Apple to avoid playing the role of "Nokia" in the tablet arena, it must continue to improve its current product lines and innovate in order to create new ones.

SEE: Why Innovation Is Crucial To Success In Business

The Battle

In 2011, 81% of tablet owners had an iPad. One year later, Apple's tablet market share had plummeted to 52%. Apple's competitive edge was ebbing to a combined assault by Samsung's Galaxy Tab, Amazon's Kindle Fire, Barnes and Noble's (NYSE:BKS) Nook and Google's Nexus 7. All of these products offer similar specifications at a more reasonable price range. Refusing to surrender the bottom half of the market, Apple's elixir is the iPad Mini.

According to multiple sources, the iPad Mini will have a 7.85-inch display with a faster processor, front and rear cameras, and the new lightning dock connector. Combine that with a more attractive price point between $200 and $300, and Apple will have finally had a horse in the lower-end of the tablet race. In comparison, Apple's current iPad begins to sell at $499.

SEE: The Fallout Of The Apple Vs. Samsung Battle

The iPad Mini is expected to be a smashing success. According to analysts at Piper Jaffray, initial sales of the iPad Mini in 4Q 2012 could be 5 million units, but at the price of 1 million current iPads. Even so, Apple would much rather have customers stick with the firm than switch to a rival's tablet line.

The iPad Mini comes at a critical time. Tablet usage in the U.S. has risen dramatically in the last year: from 11% of American households in July 2011, to 25% in August 2012. Apple's current iPad model is appealing to the upper market echelon, but families seeking more bang for their bucks are looking elsewhere. Thus, creating a product line catering to this consumer group is an extremely intelligent play on Apple's part. The real question is whether Apple will go for the kill; accepting a lower margin per unit would be sure to give its competition a hard time.

The Bottom Line
Apple's iPad Mini is not a concession to its competitors, but rather a challenge. Engineering the iPad Mini is a move that is sure to drive its market share and claim prospective tablet owners. Much is uncertain; Apple's growth as a company has slowed from its record-setting pace in previous quarters. A strong showing from the iPad Mini is just what the company needs to maintain its status as the most successful company in the world.

At the time of writing, James Kerin did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  3. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  6. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  7. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  8. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  9. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  10. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center