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iPad Mini to drive lower-cost tablets, says analyst

Tablet vendors will strive for sub-$199 prices this year, especially after the release of the next version of the iPad Mini, according to a J.P. Morgan analyst.

Apple's iPad Mini.
Apple's iPad Mini. Apple

The second-generation iPad Mini will force tablet vendors to continue to drop their prices, says J.P. Morgan analyst Mark Moskowitz.

In an investors note out today, Moskowitz raised his 2013 tablet sales forecasts based on a boost from the Mini and other low-cost tablets.

The analyst now expects tablet unit sales to grow by 65 percent this year, up from a prior estimate of 53.5 percent. Overall tablets revenues are likely to rise by 33.2 percent, compared with the previous projection of 32.5 percent.

Apple will be the major beneficiary of those higher tablet sales. In Moskowitz's opinion, other device makers haven't been able to cook up a tablet as "compelling" as the iPad, at least not yet. As a result, the rest of the industry will be forced to compete on price.

"In our view, 2013 will be important for the laggards because Apple's iPad Mini, particularly when the second generation is launched, stands to drive other vendors to even lower price points," Moskowitz said. "We expect sub-$199 price points to be reached this year by other vendors, but we are skeptical the feature sets will be able to establish a sustainable sales pipeline."

Prices will also dive as more players enter the tablet market. The analyst expects average selling prices to continue to drop by double digits this year and next. But those lower prices will drag down tablet revenue in 2014 when Moskowitz sees unit sales growth of 31.7 percent year over year -- but revenue growth of just 14.5 percent.

The analyst expects Apple to continue to lead the tablet market, though he thinks Samsung will gain more traction by expanding its lineup.

He also believe Google will try to boost Android's market share by offering a larger variety of tablets and spending more on TV ads.

"We think Google is likely to see higher unit sales of its lower priced Nexus 7 tablets (vs. the Nexus 10) due to its price advantage over several competing devices including the new Apple iPad Mini," Moskowitz said. "We also believe that Nexus devices have been selling better than the new Amazon Kindle Fire units."

And what of Windows 8 tablets?

The higher sales forecasts for the overall tablet industry could help Microsoft's Surface devices gain a greater foothold. But Moskowitz is skeptical. Surface has yet to win over enough consumers to make a dent in the market. For the December quarter, the analyst believes Microsoft sold only around 600,000 Surface units.

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