Apple is Now Forced to Build a 7-inch Tablet

With the success of the Amazon Kindle Fire, Apple can no longer sit idly by and watch this part of the market get gobbled up by a competitor. An avalanche must be averted.

When a company comes to dominate a specific market, it’s seen as a failure if another company steps in and finds a weakness. That’s exactly what Amazon has done with the Kindle Fire.

Of course, the smaller Fire’s screen causes more fumble fingering than the larger iPad. Plus, it has cheaper components and doesn’t have the feel of quality. And, as we all know, Mr. Jobs explained that 7-inch tablets aren’t the right size. At the last earnings report, Time Cook expressed the feeling that it’s easier to lower the price on the iPad than to cut corners and upset the customer. That’s why I predicted that Apple would keep selling a lower price iPad 2, post iPad 3 introduction. Even so, technical and marketing arguments may no longer matter.

Kindle FireKindle Fire

Finally, it’s likely the huge sales surge of the Kindle Fire will be over after Christmas, and the sustained viability of the product in the dark days of February remains to be seen. Even so, short term effects may no longer matter.

What can’t be denied is that Amazon has found a chink in Apple’s armor. Apple execs might be feeling that if only they’d done a better job of understanding their own market, Apple would be earning all these Christmas revenues instead of Amazon. A million Kindles sold per week is evidence of Apple asleep at the wheel. How can Apple prevent this from happening again?

It’s just plain rare for a company to sit back and excuse itself out of a market and potential earnings. Yes, there are technical reasons why a seven or eight inch iPad doesn’t make sense. A composed, self-confident Apple could declare that it will give up a billion dollars to Amazon — in the same fashion that they’ve stayed out of the low price, cut-throat PC market. That kind of restraint and focus would be admirable.

My experience is that Apple execs will become a little touchy about the loss of tablet market share and the unflattering conclusions analysts will draw after the holidays. How and why Apple responds will tell us a lot about how the executive team is feeling about how to compete in the tablet market. My money is on a smart, agressive response instead of no response at all. The fire must be put out soon.