iPad 2 Price Cut Could Impact Kindle Fire, Nook

Amazon and Barnes & Noble are using pricing as their main weapon to fight Apple. While Apple's iPad is expected to fetch a premium price, an inexpensive iPad 2 could shift the tablet market.

The Apple iPad 3€”no matter how blazingly fast its processor or crisp its display€”won't have Amazon fearing for sales of the Kindle Fire, its $199 tablet that helped to nearly double the number of American tablet users during the December holiday season. It's Apple's existing iPads, and what it does to their prices, Bloomberg reported March 6, that could have major consequences for competitors that use pricing as their primary weapon in their fight against Apple.

Apple CEO Tim Cook is expected to take to the stage of San Francisco's Yerba Buena Center for the Arts March 7, and introduce the newest Apple iPad. At least, that's what Apple's detail-light invitation has guests expecting.

Just as introducing the iPhone 4S in October, Apple announced deep discounts to its existing iPhones€”making the iPhone 3GS free with a new wireless contract and lowering the iPhone 4's price tag to $99€”Cook is expected to announce the new price of the iPad 2. And, by extension, Cook could alter the fate of the Amazon Kindle Fire and the Barnes & Noble Nook tablet. Both devices keep hardware pricing low, relying instead on revenue from the services and software that the tablets tend to encourage consumers to consume.

Canalys analyst Chris Jones told Bloomberg that Apple might reduce the iPad by $100, offering it for $399. It's a price that could woo users from the $199 Amazon and Barnes & Noble options, though it wouldn't mark certain disaster for the latter.

Ovum Principal Analyst Adam Leach wrote in a March 7 research note that he expects competition in the tablet space to become more intense through 2012, and not just due to pricing.

Both Google and Microsoft, with the introduction of new platforms and growing ecosystems, are expected to become more proper challengers to Apple, which has essentially€”and rightly, really, given that it created the market€”had the run of the marketplace.

€œGoogle has finally bridged the smartphone and tablet divide with Android 4.0 (Ice Cream Sandwich), offering developers a unified platform for the two types of device. This should increase the number of tablet-optimized applications, which were notably absent from Android 3.0 (Honeycomb)," Leach wrote in his note.

Leach added that Microsoft is set to launch Windows 8 this year€”which, able to easily switch between a modern look and an old-school option, is expected to appeal to longtime Microsoft users€”along with its Metro user interface and a build specifically for ARM-based chipsets.

"Microsoft€™s introduction of Windows 8 on ARM and its shift away from Intel for tablets will drastically increase the company€™s ability to compete on price point and user experience with Apple," added Leach.

That said, chipping away at a market leader takes time, and Ovum expects that Apple will hold firm to its market-leading position in the growing tablet space through 2012.

By 2016, Leach adds, Ovum expects the market for "tablet and other mobile Internet devices to exceed 235 million units."