Flunked Retail 101.

When Apple released iPhone 1 in July 2007 I plunked down $600 for one immediately. The price was ridiculous but as an investor I needed to know about a device which proved to be transformational and disruptive. A few months later nice Mr. Jobs refunded me $200 for his bonheaded pricing.

Well, Jobs may be gone, but the boneheaded gene remains in the corridors of Cupertino, making its latest appearance in the guise of the $329 iPad Mini.

Let’s be clear. There is only one reason Apple entered the mini-tablet segment. To make money. They perceive that they can make significant amounts while retaining the brand’s dominance of the tablet sector by entering the mini segment. Only there are perfectly capable tablets like the Nexus 7 at $199 and much less capable ones like the Kindle Fire for even less. Would you pay $130 more for the Apple product, assuming you do not dine our nightly and do your own laundry? Obviously not. Your school age child can still pull up Wikipedia just fine on his $199 Nexus.

So say goodbye to conquest sales at that price. Because conquest sales are everything for Apple, just as they are for luxury car makers. Once you have used it, you do not go back. You just buy more. And you become a repeat customer.

So pricing the iPad Mini off standard profit margins makes no sense. It needs to be priced as a loss leader/entry product to get the poor schmuck using Android into the Apple ecosystem. And $329 is not going to do it.

$249 is the right price for this device. $329 sells to zealots and the converted only. $249 sells to everyone. And given that connectivity is the lifeblood of mobile device, where on earth is Apple coming from charging a $130 premium – like on the regular iPad – for a Qualcomm cellular chip which retails for $29? Now your Mini is $459. That’s plain stupid, Apple.