Apple is expected to make its biggest product move on Tuesday since debuting the iPad two years ago, launching a smaller, cheaper tablet into a market staked out by Amazon.com Inc and Google Inc.
Apple hopes to beat back their charge onto its home turf of consumer electronics hardware, while safeguarding its lead in the larger 10-inch tablet space that even deep-pocketed rivals like Samsung Electronics have found tough to penetrate.
Amazon's Kindle and Google's Nexus 7 have grabbed a chunk of the lower end of the tablet market and proved demand for a pocket-sized slate exists, helping force Apple into a space it has avoided and at times derided, analysts say.
A smaller tablet would mark the first device to be added to Apple's compact portfolio under Chief Executive Tim Cook, who took over from co-founder Steve Jobs just before his death.
Apple sensed early that they had a real winner with the iPad and that has proven to be correct, said Lars Albright, co-founder of mobile advertising startup SessionM and a former Apple ad executive.
They have a large market share, and to protect that market share they have got to be innovative, he said.
Wall Street analysts have said for months that Apple was planning a less expensive version of the iPad to take on cheaper competing devices, a move they say might hurt its margins, but prevent its rivals from dominating an increasingly important segment.
The chief rival is Amazon, which proved a 7-inch tablet at around $200 has consumer appeal. The Kindle Fire, released last year for $199, was one of the hottest-selling holiday gadgets. It pressured Amazon's margins but gave it potentially millions of new high-spending customers.
Amazon sold more than a million Kindles a week during December, paving the way for others like Google with its Nexus 7 to try and beat Apple in a market the company created.
The Internet retailer has now put its second-generation Kindle Fire HD in the market, which it says is the best-selling product across all of Amazon worldwide, based on undisclosed US sales figures and international preorders.
Google's Nexus 7 tablet, built by Asian manufacturer Asustek