The new iPad model hitting stores Friday comes with several improvements over the original version but the same price tag, hobbling efforts by rivals at breaking Apple Inc.'s hold on the emerging market for tablet computers.
Competitors such as Motorola Mobility Holdings Inc. can't seem to match the iPad's starting price of $499. Tablets that are comparable to the iPad in features cost hundreds of dollars more, while cheaper tablets are inferior to the iPad in quality.
Usually, the early products in consumer electronics, such as the first Blu-ray players or digital cameras, are expensive. Competition then gradually brings prices down. With the iPad, the reverse is happening, spelling trouble for competitors.
It's rare for prices to start low and stay low, yet it looks as if that's exactly what Apple intended. Apple appears to have chosen, right from the start, to make less of a profit from its iPads than it does from iPods and iPhones. That's an odd move for a company that isn't known for cheap products.
Apple's profit margin on the $499 entry-level iPad model is about 25 per cent, according to an estimate by Toni Sacconaghi at Bernstein Research.