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Why Steve Jobs Was Wrong About the iPad Mini

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An interesting thing has happened in the days since Apple (AAPL) released its new smaller iPad:

Many Apple devotees have said it will become THE iPad, at least in their own personal use.


Mainly because of weight and size.

Once you've held the new iPad Mini, the full-size iPad feels like a brick.

Related: Apple's New iPad Mini Is Pricey But That Won't Deter Fans: TechCrunch's John Biggs

Apple analyst John Gruber says the Mini has become his main iPad. Apple analyst Dan Frommer thinks Mini sales will soon surpass full-size iPad sales and become Apple's second-best selling gadget after the iPhone. Seamus Bellamy and Brian Lam at Wirecutter say the iPad Mini is "the best tablet and way better than the full-sized iPad for nearly everyone."

All this despite a relatively low-resolution screen that has disappointed most Apple fans.

(I'm a happy Apple customer, if not a fanatic, and I think the screen looks great. But I'm still using an older iPhone, so I haven't been spoiled by the "retina" resolution screen that Apple uses on its new iPads and iPhones yet. And the weight and size of the new iPad really is great.)

Related: Forget The iPhone 5 — Apple Is About To Start Production Of The iPhone 5S

Given the lower price-point of the new iPad Mini, which should get considerably cheaper over the next couple of years, it seems likely that the Mini might, in fact, fulfill the initial promise of the iPad, which was to have low-priced tablets all over the house. A tablet for each person in the family. Tablets for guests. Tablets in the kitchen. A tablet in the bathroom. Apple's Mini is still too expensive for that to happen, but the prices of other tablets are now hitting levels where it could quickly become a reality.

Related: Here's A New Report On Why Apple Decided To Overcharge For The iPad Mini

And all this is ironic, given the initial appraisal of Apple founder and CEO Steve Jobs of smaller tablets.

Back in 2010, Jobs famously dissed smaller tablets and said that Apple would not make one. He pronounced the smaller tablets "DOA--dead on arrival," and explained that the screen-size was just too small to create a good app experience.

(Apple recently said that Jobs was just dissing 7-inch tablets, while the iPad Mini is slightly larger, but as the transcript shows, the slam was aimed at all tablets smaller than 10 inches).

Jobs' rant about smaller tablets was a classic (read it here), and he was certainly right that the first "avalanche" of competitors to the iPad would flop.

But it's becoming clear that Jobs was dead wrong about the potential for smaller tablets, as the reactions of Apple fans who have bought the Mini make clear.

In fact, if normal folks view the Mini the way early adopters do, it seems possible that the full-sized iPad could soon come to seem like a huge, lumbering dinosaur--the same way the MacBook Pros and iMacs of several years ago seem relative to the versions that have just been released.

Of course, Steve Jobs was known to change his mind from time to time. And he was also known to go on awesome hyperbolic rants about the pathetic lameness of the competition. So his famous 2010 dissing of smaller tablets may have been driven primarily by the latter desire rather than an actual belief that all smaller tablets would be DOA.

Either way, if the early read is clear, Apple's next mega-hit product may be one that Jobs publicly bodyslammed two years ago.

By the way, if the iPad Mini does become "The iPad," what wlll that mean for Apple's business?

Related: iPad Mini: Will It Cannibalize Apple's Regular iPad Sales?

Initially, anyway, it might mean a modest hit to revenue growth.

Apple's full-sized iPad is now a $40 billion business. It seems unlikely that normal Apple users are likely to buy BOTH a full-sized iPad AND an iPad Mini. Rather, they'll likely choose one of the two. And based on the initial reaction, the choice for most is likely to be the iPad Mini. iPad Minis will likely have an average price-point that is about $200 less than the full-sized iPad. So, on a per unit basis, Apple's revenue will take a hit.

But this loss of revenue on a unit basis will likely be at least partially offset by some additional sales--especially next year, if Apple releases an upgraded version of the Mini and the current version gets cheaper. This could help increase the velocity of iPad sales, even though revenue per-unit decreases.

Related: Nothing Lasts Forever: Apple Is Showing Its Age

The iPad Mini will also likely have a smaller gross profit contribution margin than the full-sized iPad. So, especially initially, Mini cannibalization could put pressure on Apple's profit margin. As with revenue, this margin pressure should be offset by additional margin dollars.

But if the iPad Mini becomes the main iPad, it seems reasonable to conclude that this will put more pressure on Apple's overall profit margin.

Another irony here is that, two years after the launch of the original iPad, Microsoft (MSFT) has finally scrambled to produce a well-reviewed tablet of its own--the Surface. But the Surface is a bigger tablet. It will be frustrating for Microsoft, to say the least, if the company has finally made a strong entrance into the tablet market only to have bigger tablets quickly rendered obsolete.

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