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Amazon, Barnes & Noble slash e-reader prices

LOS ANGELES/NEW YORK (Reuters) - Amazon.com Inc and Barnes & Noble Inc slashed prices on electronic book readers on Monday, responding to intensifying competition as Apple Inc’s iPad gains market share.

William Lynch, President of of Barnes & Noble.com, is seen as a silhouette during the launch of nook, the Wireless eBook Reader, at a news conference in New York October 20, 2009. REUTERS/Shannon Stapleton

Shares in both companies fell about 3 percent as investors feared a price war would erode profit margins on e-readers ahead of the 2010 holiday season.

Apple’s iPad, launched in April, sold more than 2 million units in 60 days, and analysts say the well-received device has been steadily luring customers away from the Kindle and Nook.

There is pressure on Kindle and Nook “to come back and establish themselves,” said Mike Souers, a Standard and Poor’s analyst.

He said other e-reader makers, which include Sony Corp, may have to cut prices to safeguard market share.

The overall electronic book business is booming. Goldman Sachs expects that about 12.8 percent of all books sold by 2015 will be electronic, up from 3 percent now. LG Display, expects the market to grow almost 80 percent in 2010.

NICHE OR MAINSTREAM?

Some analysts say Amazon gets just a single-digit percentage of its revenue from the Kindle and that any margin loss can be offset somewhat by wider adoption and increased book sales.

Charles Wolf, an analyst with Needham and Co, said e-readers -- despite being “primitive” when compared with the likes of the iPad -- will have an audience.

e-readers consume less power, are easier to read, and weigh less, executives and analysts said.

Amazon announced its $70 price cut to $189 hours after Barnes & Noble lowered the price on its own 3G compatible “Nook” to $199. Both had cost $259.

Barnes & Noble also introduced a new Wi-Fi-only version of the Nook for $149.

The move comes as Apple’s iPad, launched in the spring, has drawn many shoppers to its e-bookstore and Borders Group Inc gets ready to open its own e-bookstore.

Barnes & Noble introduced Nook in October. The company is set to report its fourth-quarter earnings next Monday.

The first version of the Kindle went for $399 in November 2007 when it was launched.

Shares in Amazon closed down 2.6 percent at $122.55, while Barnes and Noble stock finished down 3.2 percent at $16.53.

Editing by Edwin Chan and Carol Bishopric

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