Update – Our Investigation and What You Need to Do to Upgrade.

Apple just caused itself a huge unnecessary headache by bringing out the iPad 4. It’s not really a complete new iPad but more of a minor upgrade to the iPad 3.

The new iPad features a new A6 chip which Apple claims is twice as fast as the old A5. It also has twice as fast wi-fi, LTE connectivity and the new lightening connector charger which also charges the new iPhone and iPods. All of this is at the same $499 price.

The trouble is these are actually really significant differences and everyone who just bought an iPad 3 is extremely and understandably upset. As one person on twitter said the new iPad 4 chip will be powered by the tears of iPad 3 owners. In the end though consumers may actually be the ones to benefit. There are already reports that one Apple shop will give you a free upgrade if you bought the iPad3 less than 30 days ago. And if one Apple store is, it’s pretty certain they all will. However you’re still not going to be happy if you bought it 31,32 etc days ago.

My guess is that millions of iPads could be exchanged and this could end up damaging Apples brand and costing them a fortune.

My questions, why did Apple do this? Has it planned for the consequences? Where on earth does this leave the iPad 2? What happens to all the returned iPad 3s?

Part of the reason Apple has done this, is that it fears the new iPad mini will start cannibalising sales of the larger iPad. If this happens it could significantly cut into Apples margins. They felt they had to offer something extra to encourage people to spend the extra money and go for the larger version.

Of course the other reason is that this keeps Apple even further ahead of the competition. But has it planned for the upset iPad 3 owners? My guess is no, because the lack of clarity and the strange inconsistent messages we’re getting from Apple stores. If that’s the case it’s a big mistake and Apple has made a huge strategic error. But Apple must have planned for the large number of iPad3’s, it must have sitting in its inventory at the moment, which are now obsolete.  So what happens to them all.

The trouble is the iPad 3 is too similar to the iPad 4 to conveniently drop it into a lower price category. That would hurt margins and only upset iPad 3 buyers even more. Moreover this would also kill the iPad 2 and then its price would have to be dropped as well. So how does Apple offload the iPad 3? Could they be sent back to the factory and upgraded cheaply? If that’s the case the situation might not be to bad. The next few days will tell us a lot more.

Apple store iPad comparison

The iPad 2 pricing is also messed up in my mind. The iPad 2 now seems very expensive when it is only $100 more for an iPad4.

Apples share price is down 3% today. This is largely because it slipped out during the presentation that Apple had only sold 15 million iPads in the fourth quarter as opposed to the 18 million expected by analysts. But a better reason in my mind is the confusion between the iPad 4 and iPad 3. What a bizzare situation. Apple has damaged itself by releasing a better product at the same price.

Despite all this I felt the presentation was impressive. It is amazing how many new things Apple has announced in the last two months. The new 5mm iMac was particularly incredible, more impressive than the mini iPad in my opinion.