Inventing a new device category is hard. If it wasn't, the category would probably already exist. So there should be no surprise that Apple's iPad announcement has yielded wildly different responses. Here is my take.
First, as the happy owner of a Kindle 2, buying a $499 media pad is something I can contemplate. The Kindle DX at $489 with the same sized screen becomes a very tough sell versus the entry level $499 iPad. I love my 6" Kindle, and while it is in a different league at $259, I would have to stop and think about whether I'd buy it again today. Now, about that iPad...
The iPad is not a mobile device in the same sense as your phone. You will not carry the device around in your pocket. It is not a big phone. Instead, it is something new. I see three usage scenarios for it.
1. It is a device you use at home to access media, and play games. Videos, Pictures, Books, and the web. It is a couch device, a bed device, a kitchen table device. When you get home from work, you can leave your laptop in your bag, and just use the iPad.
2. It is a laptop replacement on trips. Headed on a short business trip, or on vacation? Don't want to take your laptop, but don't want to be stuck reading your iPhone for a few days? The iPad is a great alternative. You can take a keyboard with and catch up on emails from your hotel, but have a small device to carry in your bag during the day to spend 15-30 minutes checking in throughout the day.
3. Business/Education - Developing specialized applications and using the iPad as a computing platform. Whether it is kids in schools reading their textbooks and doing homework or sales associates at the local retail outlet showing you color alternatives, there are tons of special purpose applications that can leverage a device in this category. And the rate of development of iPhone applications to date certainly makes this seem reasonable.
Personally, I think the non-3G versions are great alternatives, as I don't envision myself using a device like this out of Wi-Fi range. So the base model is actually very appealing, and at $499 is still somewhat reasonable. That said, I'm not going to run out and buy one on day one. But I can see the second version as a great replacement for my Kindle.