The long-running rumors surrounding Apple and the release of a smaller iPad are circulating once again, this time courtesy of two sources with knowledge of the plans speaking to Bloomberg, with both asking not to be identified as the iconic retailer hasn’t yet made the plans public.

They say the smaller iPad is very likely to be announced along with the new iPhone in October, just in time for Christmas shoppers. It would be an ideal addition to the lineup and would enable the American retailer to directly compete against popular tablets like Amazon’s Kindle Fire and Google’s latest effort, the Nexus 7.

The tablet would have a screen that’s 7 to 8 inches diagonally and feature the same 1024 by 768 resolution as the first two iPad models -- in other words no retina display. The smaller and less costly screen would presumably allow Apple to price the device closer to the ~$200 mark targeted by Google and Amazon.

Apple has dominated the tablet market since the first iPad went on sale in 2010, and currently has a 61% share, according to figures from Gartner. Despite this, the market is still growing and estimated to reach $66.4 billion this year, with the competition between the tablets that make up the remainder of the market fierce.

“It would be the competitors’ worst nightmare,” Shaw Wu, an analyst at Sterne Agee and Leach told Bloomberg. “The ball is in Apple’s court.”

Manufacturers have been releasing a stream of smaller tablets with a primary focus on media content consumption, like e-books and videos, which for tablet makers like Amazon has proven to be very popular. The lower pricing has attracted consumers and enabled those producing them to increase their market share without having to directly compete against the dominant iPad.

While competition would be much stronger for Apple if they released a smaller tablet to the market, it would certainly help them maintain its dominant position. As always, rumors should be taken with a pinch of salt, but it would certainly be interesting to see the impact it has on the market should a mini iPad come to fruition.

Image credit: CNet.