Amazon.com Inc cut the price on its most expensive Kindle electronic reader, the latest salvo in a price war in response to Apple Inc's pricier iPad tablet computer.
It was the second price cut for the online retailer's line of e-book readers in as many weeks. Last week, Amazon cut the price of its cheaper Kindle with a 6-inch screen to $189, hours after bookstore chain Barnes & Noble Inc lowered the price of its Nook e-reader to $199. Both had cost $259.
Amazon and Barnes & Noble could be forced to cut prices further on their devices to compete with the iPad, Which also functions as an e-book reader and which sold more than 2 million units in its first 60 days on the market.
(Prices) could go to zero, said Needham & Co analyst Charles Wolf, who said manufacturers should price the devices low to drive sales of e-books. If priced correctly, e-books would make up for any losses on the e-readers themselves.
Amazon's model should be selling books- and to hell with the device itself, Wolf said. The iPad is raising hell with everybody.
The price cut on Thursday was on the Kindle DX, which comes with a 9.7-inch screen. The company said it updated that reader to include a new graphite enclosure and a new, high contrast electronic ink display.
The reader will sell for $379, down from $489, and have free 3G wireless connection with no monthly bills or annual contracts, as the earlier model did, the company said. The new Kindle DX is available for pre-order starting today and it ships July 7.
The latest price cut comes as retailers such as Amazon and specialty book store chain Barnes & Noble try to protect their share of the e-books market, the rare bright spot in the moribund bookselling industry.
Earlier this week, Barnes & Noble said sales on its website, which includes e-books sold via the Nook, would rise this year by 75 percent and reach $1 billion. It added the Nook will be central to reaching its goal of winning 25 percent of the e-book market within a few years. It currently has about 20 percent of the e-books market.
But Barnes & Noble, the No. 1 U.S. bookstore chain by sales, also warned that investments to develop the Nook and its e-bookstore would weigh on results this year.
In addition to the iPad, the Nook and Kindle also compete with Sony's Reader device. Industry experts and rivals say the field will get even busier, with more e-readers expected this year. Borders Group Inc is set to launch its own e-bookstore soon but is not developing its own reader.
Apple's iPad, launched in April at a starting price of $499, but unlike competing models, it has a color screen and can be used as a full computer.
Still, some analysts say dedicated e-readers such as Nook and Kindle are appealing because they consume less power, are easier to read on, and weigh less.
Kindle's base price plunged even lower on Thursday morning to $149.99 -- but only for one day -- on Woot.com, the quirky online store whose purchase by Amazon was announced on Thursday. By 9:30 AM ET, the e-readers were already sold out.
Shares of Amazon.com were down 1.2 percent on Thursday, while Barnes & Noble shares were down 2.1 percent and Apple shares were down 2 percent.
(Reporting by Franklin Paul and Phil Wahba in New York; additional reporting by Sakthi Prasad in Bangalore; Editing by Dave Zimmerman and Derek Caney)