Amazon set to rival Apple with tablet launch

Apple is girding for the entry of the first major challenger to its iPad tablet computer, a device from Amazon, whose low-cost Kindle is the most popular e-reader on the market.

In a tactic more usually associated with Apple, Amazon has invited the media to a mysterious event tomorrow and batted away all inquiries as to what will be unveiled there, but the speculation is focused on a tablet that Amazon's chief executive Jeff Bezos has been dropping hints about for months.

Analysts are already hailing the arrival of the device as "a game-changer" that will shake Apple's near monopoly of the tablet computer market and catapult Amazon into the big league of companies selling digital content. As well as selling electronic books, Amazon will also be able to go head-to-head with Apple in the sale or rental of movies and software "apps" for tablet devices.

Amazon's launch comes after a string of disasters for other tablet makers who have gone up against the iPad sales juggernaut. Research in Motion, the maker of the BlackBerry, issued a profit warning earlier this month in part because unsold stocks of its new PlayBook device were piling up in its warehouses. Samsung also recorded a disappointing start to shipments of its Galaxy Tab, and Hewlett-Packard gave up entirely on the tablet business after its TouchPad, based on operating software it acquired for $1.2bn, failed to sell.

Apple, meanwhile, has sold 29 million iPads since the device was unveiled by then-chief executive Steve Jobs 15 months ago. Its launch represented a serious challenge to the Amazon Kindle, which has just over 50 per cent of the e-reader market, but which risked being undermined by a tablet device that could act as an effective e-reader as well as doing much more.

Apple shareholders see the prospect of a full-service tablet from Amazon as the most serious challenge yet to the iPad, and Apple shares were down more than 2 per cent yesterday, despite the generally buoyant stock market. As well as nerves ahead of the Amazon launch, a report, written by analysts at JP Morgan, said that several suppliers indicated in the past two weeks that Apple lowered fourth-quarter iPad orders by 25 per cent. "Our understanding is that this is not in preparation for a new model launch," said Gokul Hariharan, JP Morgan's Asia Pacific electronic manufacturing services analyst.

The tech industry has gone into speculation overdrive on what the Amazon tablet will look like. According to well-informed sources, it is a big departure from the original Kindle, which used e-ink rather than the back-lit screens typical of computers, and features a touchscreen interface. It will run Google's Android operating system, for which Amazon already operates an app store selling software. And it will price at about half the level of the iPad.

MG Siegler, a technology blogger who claimed to have seen a prototype of the device, said earlier this month that it would be promoted heavily on Amazon.com and will initially be bundled with Amazon's movie streaming service, Amazon Prime.