Classic misdirection. Apple wanted to enjoy big margins from $500+ iPads as long as possible. There was no reason for them to release a cheaper device until som

Classic misdirection. Apple wanted to enjoy big margins from $500+ iPads as long as possible. There was no reason for them to release a cheaper device until someone forced their hand. They still have all the momentum to make the move gracefully. This was exactly the move they were not able to make with the iPhone when it was facing increased competition. They were locked into one US carrier and had limited international reach. So they simply couldn't respond in the same way. With the 7" iPad they can follow the iPod model directly.