What about the remaining inventory stock of the iPad 1? That's easy: Drop the remaining units on hand by $200 to $299 or so as the shelves clear out. Apple's ability to take cost out of the iPad 2, as well as superior volume discounts achievable at 60 million annual units, poses a nasty dilemma for its competitors Motorola ( MOT), Research in Motion ( RIMM), Samsung, Dell ( DELL), Hewlett-Packard ( HPQ) and all the others. The various Android licensees will eventually catch up to Apple's head-start in the market, but 2011 is looking increasingly unlikely for Google's ( GOOG) Android to match Apple's iPad volumes. Especially with an Apple $100 price cut, the competitors will have to reload for 2012 or take a gross margin hit. Apple's competitors are unlikely to get off the ground competing with the iPad unless their tablets start at $199, unsubsidized. The two main reasons Apple commands a price premium are 1) the superior shopping experience of the Apple stores, and 2) iTunes. Right now, Android -- and soon RIM and HP -- are unable to match these two key Apple advantages. Naturally, Apple has several things up its sleeve other than a $100 price cut for its new iPad 2 series. This is likely to include new software and services, such as a revamp of iTunes, enhancements to MobileMe and NFC (near field communications) payments, to be announced at some points throughout 2011. That said, as far as the iPad 2 is concerned, what will dominate the conversation won't be some new hardware specifications -- but rather the $100 price cut. These theories of mine are not based on any form of "sources familiar with the matter" or anything equivalent. My statements are purely based on combining various classes of leaks published by the major blogging sites, together with my own logic as to how the market works and what is therefore likely to happen. That said, you can read here what I predicted about the iPad 1 more than a year ago. At the time of publication, Wahlman was long AAPL, GOOG and RIMM.