Why it's a good idea • A smaller tablet would help Apple further its lead in the tablet market.
"From a competitive standpoint, we believe an iPad mini with a lower price point would be the competition's worst nightmare, says Shaw Wu, an analyst at Sterne Agee. "Most (competitors) already have a tough enough time competing against the iPad 2, as well as the new iPad."
Apple has successfully fended off competitors who have tried to sell tablets in iPad's size range. But last year, Amazon.com Inc. figured out how to crack Apple's stranglehold on tablets by making a half-size, no-frills tablet. The result was the Kindle Fire, which sells for $199 basically, the cost of production. Amazon has sold millions of them.
Wu says he's seen evidence of Apple experimenting with both smaller and larger tablet screens since 2009, and doesn't sense that the release of an iPad mini is "imminent."
What it might cost • It could be hard for Apple to make money from an iPad-quality 7-inch tablet that sells for $299. Analysts at IHS iSuppli estimate that a smaller tablet would cost around $250 to produce, a figure that doesn't include development costs, packaging or patent royalties. That suggests Apple would price it at $329 or $349.
"The first thing you always have to keep in mind is: Apple is not going to sell an unprofitable product," says Rhoda Alexander at iSuppli.
Why it's a bad idea • A smaller iPad would be a headache for software developers.
"Going to a different screen size ends up being a ton of work," says Nate Weiner, the creator of Pocket, an application that stores Web material for later reading.
"If you take, for an example, an interface built for the iPad and try to cram it into the Kindle Fire, it just doesn't fit," he says.
However, developers who have already adapted their programs to the Kindle Fire or other 7-inch tablets wouldn't face a big hurdle in adapting to a third Apple screen size, Weiner says.
What Jobs thought • Apple's late CEO famously ranted in October 2010 against the 7-inch tablet Samsung Electronics Inc. was set to launch.
"The reason we wouldn't make a 7-inch tablet isn't because we don't want to hit a price point, it's because we don't think you can make a great tablet with a 7-inch screen," Jobs said. "The 7-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad."