It seems Apple is coming under intense pressure from the runaway success of Amazon’s Kindle Fire tablet.
Recently, Amazon announced that it is selling over 1 million Kindles (including Kindle eReaders) each week, which is comparable to about 11 million iPads sold by Apple during the entire last quarter.
According to DigiTimes, Apple could come up with a 7.85 inch iPad next year in order to overcome the challenge posed by 7 inch Kindle Fire tablets, even as other competitors such as Research in Motion and Motorola Mobility continue to struggle in the tablet market. 
Our $500 price estimate for Apple stock is about 30% above market price.
A smaller iPad might not be dead on arrival
Interestingly, Apple’s Steve Jobs had famously once proclaimed that competitors’ 7 inch tablets are “Dead on Arrival,” citing that tablets should have a 10-inch screen at a minimum for an optimum user interface experience (see Do 7-Inch Tablets Stand a Chance?).
Part of this stemmed from the fact that the 7-incher is a tweener – too big to be a smartphone and too small to be an effective tablet. If Apple indeed comes up with a 7 to 8 inch tablet, it will be a significant design change from the current 10 inch screen size of the iPad… Read More [via forbes]