as a first gen ipad owner, I think it will have the opposite effect. I had the ipad sitting on my dining table for over a year now, collecting dust as I'd rather use my kindle for reading, my laptop for computer stuff or phone when on the go. I know a lot of people will disagree, but I know for a lot of people once the whole new toy effect wears off.. it becomes an expensive toy. For the people like me it will be hard to justify paying $500 for a tablet again.

I think its actually quite brilliant strategy as HP is still in the business of selling computers, flood the market with good, cheap tablets and reduce the magical experience to a commodity and hope it works. Asus had the same sort of lead with netbooks, and once the market got flooded they became commodity.