Other manufacturers slashed prices too, culminating in a "fire sale" during the recent holiday season, said Rhoda Alexander, an analyst who covers tablets for IHS iSuppli.
"Those price discounts have come out of the profit margin, to a large degree," she said.
Hewlett-Packard Co., meanwhile, left the market completely. In August, it decided to discontinue the fledging TouchPad tablet along with its line of smartphones, despite great reviews for the in-house software running them.
Samsung has been one of the survivors, selling 6.1 million tablets last year, according to IHS iSuppli. That makes it the second largest tablet maker after Apple, with a market share of 9 percent compared with Apple's 62 percent. Samsung is also one of the world's leading makers of smartphones, chips and display screens. The company is, therefore, big enough to capture some of the advantages that Apple has as a buyer of components in bulk.
Samsung has put out a bevy of tablets in different screen sizes, hoping to capture buyers, who for one reason or another, want something other than the 9.7-inch screen of the iPad.
In November, another successful challenger appeared: Amazon.com Inc. The Internet retailer figured out that people would buy a device other than an iPad if the price was considerably lower. It put together a Spartan tablet with a minimum of frills and started selling it at $199. Amazon doesn't make a profit on its Kindle Fire, according to IHS iSuppli, but it hopes the device will help boost sales of movies, music and electronic books at its online store.
Analysts estimate that Amazon sold 3.9 million to 6 million Kindle Fires in the first six weeks, making it the third-largest seller of tablets last year. Looking solely at the last three months of 2011, Amazon beat Samsung as the second-largest seller of tablets.
Barnes & Noble Inc. adopted a similar strategy and was also successful, at least considering that it's a bookseller venturing into consumer electronics. It updated its Nook Color e-reader to make it more of a general-purpose device and called it the Nook Tablet. ISuppli estimates that it sold 3.3 million Nook tablets last year.
During this year's holiday shopping season, a new raft of challengers will appear: tablets powered by Microsoft Corp.'s Windows 8. Microsoft has provided software for PC-style tablets before, but they've never been more than a niche product. Now, the company is creating a version of Windows that runs on phone-style processors such as those used in the iPad. Reviews of the pre-production software have been positive. It will allow users to do some things they can't on an iPad, such as running two applications side by side on the same screen.
Still, analysts expect Apple to regain market share, after losing some because of the unsustainable discounting by competitors late last year. On Wednesday, Apple said it would keep the iPad 2 in production and cut the starting price to $399 — the same price as Samsung's Galaxy Note Tab 10.1.
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