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Is Apple losing its way with the iPad Mini?

Just when we thought that the iPad mini had been consigned to vapourware heaven, Apple has sent out invites for a special event on 23 October. With the tagline “we’ve got a little more to show you,” the star of the show will be a 7.85in iPad mini. Depending on which rumours you believe, the diminutive iPad could also be flanked by a 13in MacBook Pro with Retina display, an Ivy Bridge-powered Mac mini, and updated full-size iPads with the new Lightning connector.

I have no doubt that the iPad mini, like its larger sibling, will be incredibly successful. It will almost certainly be the biggest selling tablet this Christmas, beating out the Kindle Fire, the Nexus 7, and Microsoft Surface. (And yes, in case you were wondering, Apple has intentionally timed its iPad mini unveil to take as much wind out of Microsoft’s sails as possible. I wouldn’t be surprised if the iPad mini starts shipping on October 26, the exact same day as the Surface).

There’s this nagging feeling in the pit of my stomach, though, that Apple is cutting off its nose to spite its face. I cannot get over the feeling that the iPad mini is a reaction to the Nexus 7 and Kindle Fire, rather than the result of a Jony Ive or Steve Jobs epiphany. After an epic run of revolutionary and evolutionary devices that resulted in Apple becoming the most valuable company in the world, the iPad mini sounds like a me-too device with the sole purpose of stemming the 7in tides and making a quick buck.

Then there’s the iPad mini price. We won’t know for certain until next week, but one leak has pegged that iPad mini at €250, which, given Apple’s current pricing scheme, will probably equate to £200 in the UK and $250 in the US. At £40 more than the Nexus 7 and Kindle Fire, and $50 more in the States, Apple will still command a decent profit margin – but at what cost? At £200, the iPad mini would be £50 cheaper than the 4in iPod Touch, which starts at the £250 mark. At £200, the iPad mini would be half the price of the full-size iPad 3!

At £200, it’s impossible to imagine that the iPad mini won’t completely gut the sales of the iPod Touch and iPad 3. Just think about it: Would you spend £50 more for a device with a screen that’s half the size of the iPad mini? Would you spend £200 more – double the amount – for a device with a screen that’s just a couple of inches larger than the iPad mini?

One of the main reasons that Apple is worth so much is that its profit margins are huge. Its iPhones and iPod Touches cost around $170 (£105) to build, and they sell for between £250 and £700. The 9.7in iPads, with their larger screens, cost slightly more – around $300 (£185) to build – but again, they sell for between £400 and £660. An iPad mini would cost about $200 (£125) to build, and yet it will probably go on sale for £200 or £250. There will certainly be higher-end models with better profit margins, but the cheapest model will probably be the most popular. Just imagine – being able to get your hands on an Apple tablet for just £200…

In the short term, then, the iPad mini will almost certainly be a huge hit – but whether it will actually improve Apple’s bottom line or shareholder sentiment remains to be seen. Another possibility, though, is that Apple knows more than we do. Apple might already know that the 10in tablet market is drying up, and that a swift segue into the 7in segment is a commercial necessity. This seems unlikely, though, considering the full-size iPad enjoyed record growth of 17 million units last quarter.

But who knows: Maybe this is Apple signalling that it’s finally ready to compete for the mass market, rather than skimming creamy profits from the top. Perhaps Apple knows that its domination of the tablet market can’t last forever, and the only way to prevent marginalisation – like in the PC market – is to wade in and do battle with the commodity tablets. We’ll find out for certain next week.