What the iPad 2 Means for Your Wallet

The Wall Street Journal

What does Apple's (NASDAQ: AAPL - News) new iPad 2 mean for you and your money? Here are five takeaways from Wednesday's product launch in San Francisco.

1. The patient get their reward.

Anyone who held off over Christmas can now get a better iPad for the same price as the old one. The iPad 2 starts at $499. While it's slightly thinner and lighter, and has a faster processor, the biggest difference is that it has cameras on the front and back, allowing users to make video calls. (Whether that's a big benefit depends to some extent on whom you're calling.)

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2. Alternatively, you can now buy the original iPad much more cheaply than you could.

The price of the most basic model—which has Wi-Fi but no 3G, and which sports 16 gigabytes of memory—was just slashed by 20%, from $499 to $399. And you can now get a refurbished model from Apple for $349—a terrific 30% price cut from the entry-level prices a year ago.

Refurbished iPads are generally products that have been returned within a month of purchase, often within a few days. They are little different from new models: Apple tests them to make sure everything is OK and gives them a new casing and battery, and they come with a one-year warranty.

3. For Apple investors, the biggest positive news from Wednesday's conference was the appearance of Steve Jobs.

That may be the reason the stock rose $2.81 to close at $352.12. The remarkable CEO took a leave of absence in January for health reasons. Since then, some sources have circulated alarming rumors about the state of his health. It seems they have been wildly exaggerated: Mr. Jobs seemed to be in decent shape. While Apple has plenty of talented executives, be under no illusion: Mr. Jobs is a leader in a different category entirely, and his unique genius at vision and marketing are a key reason for Apple's success. Investors can take real comfort from his reappearance.

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4. But the newest iPad should also give Apple investors pause ...

The latest tablet is a bit better than the old one, but—apart from the cameras—it is not amazingly so. It is not another "game changer." And it doesn't leapfrog over the growing competition. Last week, Motorola's (NYSE: MSI - News) competing Xoom tablet went on sale. The iPad 2 has an advantage on price, and still has access to many more third-party applications. But at heart the two products are comparable.

When the Xoom gets Adobe Flash, which will allow it to run videos on the Web, it will actually gain a noticeable edge. (The relevant update is due shortly.) And other competing tablets are about to hit the market, from the likes of Hewlett-Packard (NYSE: HPQ - News), Research in Motion (NASDAQ: RIMM - News) and others.

For the past year, Apple has had the tablet market almost completely to itself. Now that its competitors are rolling out their tablets, defending its overwhelming market share is going to be much harder. And they will limit Apple's ability to charge what it likes.

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5. ... While letting investors in competing companies breathe a sigh of relief.

That's especially true for Motorola. There were a lot of fears that Apple was about to unveil an iPad 2 so advanced that it would have left the Xoom already looking like last year's news. That hasn't happened. The Xoom is still more expensive: The 32-gigabyte model with Wi-Fi and 3G costs $799, compared to $729 for the equivalent iPad. (You can get the Xoom for an upfront price of $600 if you sign up for a two-year data contract.) Motorola may cut its price or offer some other promotion. But the iPad 2 doesn't kill the Xoom at all—and that's an important piece of news for investors.

So do I want an iPad myself now? Actually, I don't, but this has nothing really to do with Apple. I just fear that if I had an iPad with me I would waste an incredible amount of my time surfing the Web, watching the latest mediocre TV programs or playing those highly addictive games.

After all, that's what everyone else seems to do.

Write to Brett Arends at brett.arends@wsj.com

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