Apple iPad 2 merely an upgrade; Watch out for iPad 3, the real thing!

Apple could be a victim of its own hype, created by its muted response to media prodding for details about the upcoming iPad 2.

Cult of Mac reported that an Apple staffer speaking about the upcoming event said: For the iPad 2, don't get your hopes up too high. That's all I'm going to say. They've had a number of problems along the way, and the third-generation iPad is the one to make a song and a dance about.

While the rumor mill has reached a crescendo prior to the launch, the possibility that Apple may not give birth to a miracle baby or a revolutionary iPad looms large. The Telegraph quoted Gartner analyst Carolina Milanesi saying, I think it will be evolution rather than revolution. If the prophecy comes true, then questions are aplenty, as to why Apple is in a hurry to launch an iPad 2?

Apple has more on its mind than just a device; it's not just about iPad 2 but also about the supporting ecosystem that Apple could possibly unveil at the upcoming event.

Cloud Computing:

Apple Insider also confirmed that Apple could announce its revamped MobileMe storage service at the March 2 event. Last week Apple Insider, which was present at Apple's annual shareholders meeting, reported that Apple is due to start its $1-billion data center in North Carolina this spring. Also Gigaom reported that Apple COO Tim Cook confirmed that the North Carolina data center is intended to support its MobileMe and iTunes. Thus, Apple could use the iPad launch to highlight this infrastructure upgrade which could then become the basis to launch an iPad 3 which is closely aligned with its cloud strategy.

The older iPad will offer Apple a pricing edge over its competitors:

Questions about the future of the first iPad, after its beefy cousin arrives, have been a cause of worry for other tablet manufacturers. Apple could follow its iPhone strategy whereby it can continue to sell the older iPad at a cheaper price while launching an upgraded iPad 2. This will make the iPad a cheaper variant and a major draw for customers looking for their first tablet. Also once customers buy the older iPad Apple can lock-in the users with its iTunes and MobileMe service. Also Apple can move the storage to the cloud and make iPads with lesser memory, thus, bringing down the cost of the original iPad much to the dismay of its competitors. Currently, the most talked about tablet from the Android camp, the Motorola Xoom is priced at around $799 while the older iPad with Wi-Fi+3G with 32GB internal memory costs about $729. Apple certainly has the price advantage.

iPad 2 a mere upgrade iPad 3 the real thing:

Apple as reports confirm will add basic features to iPad 2 which were missing in the first iPad. The list includes dual cameras, a lighter iPad, a faster A5 processor and a higher RAM. The added features are de-rigueur in the current line-up of tablets. The iPad 2 could be a stop gap arrangement before the arrival of iPad 3, which will be closely integrated with its iOS 5 and also its matured cloud-strategy by then. So, iPad 3 could bring along the highly anticipated iTunes streaming subscription service. Currently, Apple offers streaming content service for its Apple TV. Expansion in its data center capacity can certainly augur such a day.

Why an iPad 2?

Launch of an iPad 2 will bulwark Apple's versioning strategy whereby Apple releases multiple versions of a single product and charges different prices for each version, increasing its product depth. It offers an iPod with varying features targeted at customers segmented on the basis of price they are willing to pay. A user has an option to buy a $49 iPod shuffle or a $399 iPod touch.

Versioning strategy is usually followed in markets where companies have short-run market power like the tablet market where Apple is facing competition from Android, BlackBerry, Windows and webOS-based tablets. Thus, Apple will move the price of iPad lower with its older iPad to gain volumes, besides gaining mileage among the mainstream buyers rather than early adopters. Volumes will offer Apple the potential to harness economies of scale which, in turn, will offer it cost advantage. Also, once the customer gets accustomed to its iOS and iTunes environment, Apple can easily move the user to its high-margin products.

On the surface value, Apple iPad 2 looks a mere speed-bump but it will actually lay the foundation for Apple to expand its market reach.