Although Apple has long dismissed the viability of 7-inch tablets, the company has been talking about a smaller iPad internally for some time — and Steve Jobs himself was "very receptive" to the idea even though he had previously called 7-inch tablets "DOA" on an October 2010 earnings call. That's the word from an email entered into evidence during Scott Forstall's testimony in the ongoing Apple / Samsung trial. In January 2011 Apple VP Eddy Cue forwarded an article that compared the 7-inch Galaxy Tab and the iPad to Apple's executive team — Tim Cook, Scott Forstall, and Phil Schiller — along with a note saying "I believe there will a 7-inch market and we should do one." Cue added that he'd "expressed this to Steve several times since Thanksgiving and he seemed very receptive the last time."
Cue even breaks down his favorite use cases, saying "I found email, books, facebook [sic] and video very compelling on a 7-inch. Web browsing is definitely the weakest point, but still usable."
That all ties in well with the ongoing drumbeat of rumors surrounding an upcoming 7.85-inch iPad, but we still don't know if the company ever decided to act on Cue's belief and actually create a product. We're covering the trial and all of the resulting internal documentation that's being entered into evidence very closely, so stay tuned.