Another thing about the comparison with the iPhone
Apple can accept lower margins on the iPhone 3GS* because it is a vastly inferior product compared to their more profitable 4 and 4S. I can't think of any reasonother than pricewhy someone would choose to buy a 3GS versus a newer model. Thus, they offer a low-margin 3GS knowing thatrather than canabilizing their premium productsit entices a customer who wouldn't have otherwise purchased an iPhone.
But an iPad mini would for many be more attractive than the full-size iPad. There absolutely will be many who would have bought the iPad 2 or even the retina iPad who instead will opt for the iPad mini. If the mini doesn't have sufficient marginsand at $199 it simply can'tthen Apple will have created a new product line guaranteed to lower their gross margins, and Apple does not do that.
When they come out with the 7.85 iPad mini, I don't think it will look like the line-up of old iPhones and iPads. i.e. with one capacity to entice those with less means. My guess is it will be a full-fledged lineup with three capacities, options for 3G/LTE, and maybe even colors beyond black and white.
* I guess it's an assumption that the 3GS is lower margin than the 4 and 4S, but it pretty much has to be true. The 3GS lists for $200 less than the 4S and it *can't* be that much cheaper to make.