We’ve already seen a fair amount of rumors regarding a smaller iPad (our own sources pointed to Apple buying 7-inch screens), but now Apple’s biggest fan John Gruber is saying the company is testing smaller 7.85-inch iPads in its labs.

Speaking on The Talk Show podcast, the Daring Fireball writer said that the smaller iPad being tested runs the same 1024-by-768 resolution of the iPad 1 and iPad 2, which means apps should run just fine without any tweaking.  “I’ve heard from multiple people that this is something that they’re kind of noodling with,” Gruber said.

He went on to clarify it’s unclear if this small iPad will ever hit the market. It’s well-known that Apple likes to test all sorts of far-fetched products in its labs, most of which never get released. But as far as crazy Apple rumors go, I wouldn’t count out a smaller iPad. Such a device would be cheaper than the current iPad (likely even cheaper than the $400 iPad 2) and far more portable.

Most importantly, a smaller iPad could make sure Apple doesn’t lose too much ground to the cheaper $200 Kindle Fire, which has a 7-inch screen and remains the only Android tablet to take off with consumers.

Via The Next Web