Price of new Amazon tablet could be big attraction

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

(Reuters) - Amazon.com Inc is expected to launch its long-awaited tablet computer on Wednesday, sporting a low-enough price to give Apple Inc's iPad some serious competition for the first time.

At a news conference Wednesday morning in New York, Amazon will likely unveil a seven-inch tablet that will let users read e-books, download digital music and video games and stream movies and TV shows.

Analysts expect the tablet to be priced around $250, roughly half the price of Apple's dominant iPad, which starts at $499.

"If Amazon prices the Kindle Fire at $250, it has the potential to become the most successful competitor to the iPad," Gene Munster, an analyst at PiperJaffray, said on Tuesday.

Having its own tablet is important for Amazon because the company has amassed a mountain of digital goods and services that could be sold through such a device. As the world's largest Internet retailer, a tablet might also encourage Amazon customers to shop online for physical products more often.

Munster surveyed 410 consumers last week, asking whether they would buy a 10-inch iPad for $599 or a seven-inch Amazon tablet at $249.

Just over 60 percent of those surveyed said they would purchase the Amazon device, while 21 percent said they would likely buy the iPad, Munster reported. The analyst used a $599 price because he said that is the average price of the iPad.

"It all comes down to price point," said Colin Gillis, an analyst at BGC Parnters. "To crack into the tablet market, that's really the only variable where you can truly compete right now."

A lower price on Amazon's tablet will likely mean the device will have fewer bells and whistles than the iPad.

Amazon outsourced the hardware design and manufacture to Quanta Computer Inc, a big Taiwan-based firm that makes computers and tablets for other PC companies, according to consumer-electronic news website gdgt.com.

Mary Osako, a spokeswoman at Amazon, did not return a phone message and email sent seeking comment.

The Kindle Fire may have a slower processor than Research in Motion Ltd's PlayBook, which was also made by Quanta, gdgt.com reported this week. TechCrunch said the Kindle Fire will not have cameras, unlike the iPad.

Still, Munster said a lack of high-end features might not deter most tablet users.

PiperJaffray's survey found the top four uses of tablets were Internet browsing, reading, watching movies and playing games.

"If Amazon can do these four things at the $249 price point, we believe there will be strong interest in the tablet," Munster added.

(Editing by Andre Grenon)