Apple pitches $499 iPad, takes on Amazon

SAN FRANCISCO (Reuters) - Apple Inc CEO Steve Jobs took the wraps off a sleek tablet that it called the iPad, pitching the new gadget at a surprisingly low price to bridge the gap between smartphones and laptops.

A buoyant Jobs took the stage at a packed theater on Wednesday to show off the 9.7-inch touchscreen tablet, which looks like a large iPhone, and to introduce a new iBook electronic reader service that will compete with Amazon.com Inc's Kindle.

The iPad is Apple's biggest bet on a new product since the iPhone three years ago, and seeks to tap an unproven market for tablets. Analysts, while impressed by the iPad's seamless functionality, also pointed out that consumers already have smartphones and laptops for their mobile computing needs.

Jobs described the iPad as a "third category" of devices, a do-everything media gadget that can surf the Web, and play movies and video games. He also left little doubt that Apple was going after the e-book market that Amazon had popularized.

"If there's going to be a third category of device, it's going to have to be better at these kinds of tasks than a laptop or a smartphone; otherwise it has no reason for being," said Jobs, who still appeared thin following his liver transplant last year.

"Now Amazon's done a great job of pioneering this functionality with their Kindle. And we're going to stand on their shoulders and go a bit further," he said.

Famous for his skills as a pitchman, Jobs, dressed in his trademark blue jeans and black turtleneck, created plenty of drama as he waited until late in the event to discuss the cost of the iPad, which analysts had expected to be up to $1,000.

Apple elected to price it for as little as $499 for 16 gigabytes of storage, starting in late March. An extra $130 is needed to equip the iPad with third-generation (3G) wireless capability. Higher-capacity models will sell for $599 and $699.

"Pricing is very aggressive, so it's pretty positive from a mass adoption perspective," said Brian Marshall, an analyst with Broadpoint Amtech.

Research group IDC said it expects Apple to ship 4 million iPad units in 2010, with about 2 million in the United States.

Shares of Apple rose to as high as $210.58 after the pricing news, up 5.5 percent from their session low. The stock closed up 0.94 percent at $207.88 on Nasdaq, within reach of its all-time high of $215.59 logged on Jan 5.

The half-inch thick, 1.5-pound iPad features Apple's own processor and 10 hours of battery life. It runs a version of the iPhone's operating system and can use virtually all of the 140,000 apps currently available for the smartphone.

"What once occupied half your living room can now be dropped in a bag," said Outsell Inc analyst Ned May. "It's pulling together a variety of needs (in) a universal entertainment device."

Apple announced a data plan deal with AT&T Inc, which appeared to have beaten out Verizon Wireless. AT&T will offer two monthly data plans for the iPad, a limited one for $14.99 and an unlimited one for $29.99.

IPHONE-LIKE ANTICIPATION

Other technology companies, including Microsoft Corp and Toshiba Corp, have launched tablets that failed to take off in recent years.

But analysts said they were impressed with the technology that Apple showed off. The iPad has a near life-size touch keyboard, and comes with all the expected features, including a calendar, an address book and maps.

"One thing Apple has proven is that they can consumerise new concepts, new technologies," said Tim Bajarin, president of Creative Strategies, a consulting firm. "That will probably be their claim to fame again with this."

However, some also mentioned potential cannibalization of other Apple products.

"If it's doing all these things and does it better than a notebook then they'd have to tell me why I'd want a MacBook," said NPD analyst Steve Baker.

Some industry watchers said the iPad, with its multimedia bells and whistles, will be a tough competitor for Amazon's Kindle. The iBooks store will let users buy from publishers including Pearson Plc's Penguin, News Corp's HarperCollins, and Hachette Book Group.

But other analysts noted that the Kindle costs less -- $259 for the cheapest version -- and was more tailored for long-form reading, at least for now.

"This is not an e-reader -- this is a device that can be used to read books," Cowen & Co analyst James Friedland said of the iPad. "This doesn't change the game -- at the same time, Apple is a formidable competitor and our view is that over time, Apple and Amazon will emerge as the two largest players" in e-books.

Shares of Amazon took a brief hit but recovered to end 2.7 percent higher at $122.75 on Nasdaq.

In an online poll on reuters.com before Wednesday's media event, 37 percent of more than 1,000 respondents said they would pay $500-$699 for the tablet. Nearly 30 percent weren't interested, while 20 percent said they would pay $700-$899.

(Additional reporting by Edwin Chan, Poornima Gupta, Ian Sherr, Gina Keating, Sue Zeidler, Alex Dobuzinskis and Paul Thomasch; Editing by Richard Chang and Tiffany Wu)