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Apple's iPad Mini: Is It Too Good?

Source: Apple

I've had a bit of time to play with the new iPad mini, and my goal isn't to give you a comprehensive review — there are plenty of gadget sites for that. My goal is to look at this from an investor's perspective.

My main questions going in: Is it any good? How does it stack up versus the competition? And what might this mean for Apple's growth prospects?

In short, it's an excellent tablet, though the screen isn't the best. I think it will beat lower-priced rivals because of where Apple chose to put its money. And while this is potentially great for Apple's growth, I see the possibility of the big C looming: Cannibalization.

First, the basics. Last week Apple took the wraps off the worst-kept secret in tech, the iPad mini. It's got a 7.9-inch display that's noticeably bigger than the 7-inch tablets in its class, including the Kindle Fire HD, the Google Nexus 7 and the Barnes & Noble Nook HD. People with medium-to-big hands will be able to comfortably grip it one-handed. The display itself has 1024x768 resolution, or 163 pixels per inch. (Read More: Two Things That Could Hurt Apple's iPad Mini )

The mini feels nothing like a full-size iPad, which has advantages and disadvantages.

The main disadvantage: the keyboard in portrait mode. The keys are barely big enough to hit. I'm a fan of touchscreen keyboards, and even I found myself approaching it with trepidation in the portrait orientation. Size-wise, it's too big to fit into almost any pocket.

The advantages, though, are many. The mini is shockingly light and thin — but it's substantial enough that it feels valuable and sturdy. In fact, in my opinion the iPad mini has the best overall physical presence of any product in Apple's lineup, Mac or mobile — it just feels that good in your hands.

The aluminum back is reminiscent of the iPhone 5, and its lack of heft makes it endearing in a way that's hard to quantify. You just want to take it with you on that quick trip to grab a cup of coffee, the same way it's become second nature to slip your phone into your pocket whenever you stand up from your desk. It's the sort of X-factor that the iPod had early on.

I find two main arguments against the iPad mini versus its competitors: the price is higher and the display resolution is lower.

Price-wise, the difference seems significant: it's more than 50 percent more expensive. Screen-wise, too, the difference is noticeable. It's hard to spot the pixels on Amazon's Kindle Fire HD and other 7-inch tablets in its class. On the iPad mini, the pixels are pretty obvious. (Read More: Here's Why Surface Beats Apple's iPad: Ballmer )

After spending some time with the mini though, I think it overcomes both issues. Here's why: Price differences matter less when we're comparing products in the $300 range and below. (Remember when competitors tried to undercut the iPod?) On screen resolution, it's a tradeoff between sharpness and size. And in the mini's case, the added size makes it significantly better than a 7-inch tablet for navigating the web, though text in particular doesn't look as good.

Some people will choose he exus 7 or Kindle Fire HD over the iPad mini for this reason. But the thinness and lightness of the mini have created, I think, a far more important issue: A lot of people will choose the mini over the full-size iPad. Because it just feels better.

If I'm right about this, there will be some cannibalization as the iPad mini moves forward to become the most popular iPad model. But a couple other things will happen, too. The current model of iPad mini will probably outsell its competitors by a significant margin. And if that happens, and Apple truly wants to capitalize on the mini's popularity, they'll introduce a Retina version of the mini next spring, probably starting at $399 or $429.

If Apple finds that education customers love the mini as much as the iPad 2, they might even let the Retina mini replace that model altogether.

If that happens, suddenly the margin issue doesn't look so intractable. Apple will get benefits from economies of scale, and margins will rise — and with a Retina mini, average selling prices will rise, too.

From where I sit, it's now up to Apple to execute on the supply side this holiday season. If consumers agree with the reviewers on this one, that will be no easy task.

email: tech@cnbc.com

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