Amazon.com Inc introduced its eagerly awaited tablet computer on Wednesday with a price tag that could make it the first strong competitor in a tablet market that has been dominated by Apple Inc's iPad.

The new device, priced at $199, may have the biggest impact on other makers of tablets and e-readers, such as Samsung Electronics Co Ltd and Barnes & Noble Inc, maker of the Nook.

It's a Nook killer, said Scot Wingo, chief executive of ChannelAdvisor, which helps merchants sell more on websites including Amazon.com. And it's a very compelling offering if you're not in the Apple ecosystem already.

The Kindle Fire tablet has a 7-inch screen, free data storage over the Internet and a new browser called Amazon Silk. Amazon expects shipments to start on November 15.

Amazon also introduced the Kindle Touch, an e-reader with no buttons and a touch screen starting at $99. And it cut the price of its basic Kindle e-reader to $79 from $99.

These are premium products at non-premium prices, Chief Executive Jeff Bezos said. We are going to sell millions of these.

Amazon shares rose 4.7 percent to $234.72 in midday trading, while Barnes & Noble dropped 9.8 percent to $11.92. Apple shares edged up 0.3 percent to $400.55.

HIT

Tim Stevens, editor in chief of gadget review website Engadget, said the Kindle Fire will be a hit.

People have been waiting for a tablet for 200 bucks for a long time and this is the best one I've seen so far, Stevens told Reuters.

Amazon's cloud computing service, known as EC2, supports Internet browsing on the Kindle Fire, a feature that will speed loading of websites and isn't available with rival tablets, Stevens noted.

Still, the Fire has only one button and no volume controls, which may be a bit annoying for consumers, he added.

If I'm listening to music, I'll have to turn on the screen to change the volume; same for movies, Stevens said.

'BLOOD BATH'

Analysts had expected Amazon's tablet to be priced around $250, roughly half the price of Apple's dominant iPad, which starts at $499. The Nook Color e-reader costs $249.

Expect a blood bath as pricing will have to get extremely aggressive, said Mark Gerber, an analyst at Detwiler Fenton & Co. He expects Amazon to sell at least 3 million Kindle Fires this holiday season, taking the No. 2 spot in the tablet market.

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.

The tablet might also encourage customers of Amazon, the world's largest Internet retailer, to shop online for physical products more often. (http://link.reuters.com/xab24s)

Breaking into the tablet market will be difficult. Companies including Hewlett Packard Co, Motorola Mobility Holdings Inc, Samsung and Research in Motion Ltd have launched tablets, but none has taken a big bite out of Apple's lead.

Apple dominates the North American tablet market, with 80 percent of the 7.5 million units shipped during the second quarter of 2011, according to Strategy Analytics.

(Additional reporting by Liana Balinsky-Baker in New York; Writing by Alistair Barr in San Francisco; Editing by Derek Caney and Gerald E. McCormick)

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