If cannibalization gives Apple domination of the total tablet market, then cannibalization is acceptable to the company. "I think Apple likes owning a market," O'Donnell adds.

"It's in strong control of the tablet market and if they do this, it will put incredible competitive pressure on everybody else," he says. O'Donnell says a $249 iPad Mini presents a strong challenge to are "because people would rather pay a few bucks more and get an iPad than to get something else."

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