March 7 (Bloomberg) -- Apple Inc. debuts its most significant overhaul of the iPad today in San Francisco. For competitors trying to get a foothold in the tablet market, the most important announcement may be what Chief Executive Officer Tim Cook does with the older models already on the shelves.
As it introduces a new iPad decked out with faster processing speeds and a sharper screen, Apple may also slash the price of the existing model from $499, said Chris Jones, an analyst at Canalys, a technology research firm. That would squeeze rivals such as Amazon.com Inc., whose $199 Kindle Fire is targeted at budget-conscious customers, he said.
Apple has cut the price of older models to attract bargain-hunting shoppers when unveiling a new product aimed at the high end, a pincer movement used with success on the most recent iPhone. While today’s focus will be on the new version, which will have access to speedier wireless networks, the iPad 2 price cut may have more significance to makers of cheaper tablets that haven’t been able to match Apple’s success.
“It will put pressure on those who are trying to undercut the iPad on price,” said Jones, who said Apple may lower the price of the cheapest iPad 2 by $100 to $399. “The market has changed in the past few months with the arrival of Amazon.”
When Apple introduced the iPhone 4S in October, it reduced the price of the iPhone 4 to $99 and the made the iPhone 3GS free with a two-year wireless contract. Older models account for about a quarter of total iPhone sales, Jones said.
Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment on plans for today’s announcement.
The new iPad will sport a high-definition display, run a faster processor and work with LTE wireless networks, people familiar with the product said in January. The expected iPad overhaul is Apple’s most significant for the tablet since its 2010 debut and will help draw both new customers and existing owners ready for an upgrade, said Carl Howe, an analyst at Yankee Group.
Apple gets about 20 percent of its sales from the iPad, attracting consumers as well as business users. With the device’s mix of touch-screen functionality and as much computing power as some laptops, Apple has created a new category of consumer-electronics devices.
Amazon’s Kindle Fire tablet, which went on sale in November, has emerged as Apple’s most credible competitor. Still, Apple controls 73 percent of the tablet market, according to Forrester Research Inc. Tablets introduced by Research In Motion Ltd., Samsung Electronics Co. and Hewlett-Packard Co. haven’t gained much interest.
“It’s an iPad market, and then there’s everybody else,” Howe said. “They are going to be selling them as fast as they can make them.”