With the introduction of the Google Nexus7 and the success of the Amazon fire, Apple is deciding to join the fray of “portable” tablets according to a report from Pacific Crest analyst Andy Hargeaves.

“We expect at least three significant small-form-factor tablets from tech behemoths to be in the market this holiday season: Apple’s 7.85″ iPad, Google’s Nexus 7, and a redesigned Amazon Kindle Fire. This will drive significant marketing spending to the lower end of the market, which, along with the attractive prices, could drive greater cannibalization of larger tablets than we currently expect.”

Apparently the supply checks that have been done are pointing toward a 7.85″ iPad that will be released this October at a price point of $299. If Apple actually does this, it will place a strong competition against the other affordable tablets that will exist at that time.  “We anticipate an entry-level 7.85″ iPad with 8GB of NAND capacity to price at $299 with an initial gross margin of 31%. We estimate Apple will sell 10.0 million 7.85″ iPads in FQ1 (Dec.) and 35.2 million in all of F2013. We anticipate 25% cannibalization of the larger 9.7″ iPad (for every four 7.85″ iPads added, we reduced our 9.7″ iPad estimate by one), so our total F2013 iPad estimate increases to 91.6 million from 65.2 million,” wrote Hargeaves in the most recent account of his research.

In other words, they have found a way to be able to downsize the iPad in order to increase their profits. For shareholders, this is a great thing, the same can be said for consumers at the same time.

With the small tablet battle coming into play, it will be very exciting to see which company will grapple the market.