UPDATE 3-Amazon cuts Kindle price to $299

* New price tag is $60 less

* Recently shipped Kindles to receive price credit
(Adds analyst comments)

By Alexandria Sage

SAN FRANCISCO, July 8 (Reuters) - Online retailer
Amazon.com (AMZN.O) has cut the price of its standard Kindle
electronic reader by 17 percent to $299, the company said on
Wednesday, the latest salvo in the war for digital readers.

The price cut comes amid a budding digital book battle
where rivals like Amazon, Sony Corp (6758.T) (SNE.N) and a host
of smaller companies are anxious to get in on the ground floor
of what some say is the future of reading.

Amazon said customers who had ordered Kindles that had
shipped within the past 30 days would receive a $60 credit on
the price difference.

Electronic readers allow consumers to read books, magazines
or newspapers on a tablet that downloads content digitally.
While the devices are convenient for those who travel and
embraced by avid readers on the go, their high prices have been
a barrier to many.

"While it is a significant drop both in terms of the
overall percentage of the price as well as getting under the
$300 barrier, it is still not going to be enough to break it
out of its niche," said Ross Rubin, consumer technology analyst
at the NPD Group.

In February, Seattle-based Amazon unveiled the second
version of its digital book reader, priced at $359. The first,
which debuted at $399 but whose price was later reduced to
$359, came out in November 2007 amid much fanfare.

'DIGITAL VENDING MACHINE'

Amazon has pointed to the Kindle as a growth driver and
said sales have surpassed expectations, without disclosing
sales or profit data.

A spokeswoman said Amazon was able to cut the price of the
Kindle as higher volume had reduced manufacturing costs.

The value of the Kindle for Amazon is in the content
purchased by users of the the e-reader, analysts say. The
retailer charges $9.99 for most bestsellers digitized for the
device.

Tuesday's price reduction could be attributable to a number
of factors, said Rubin.

"(It's) growing economies of scale or perhaps Amazon is
seeing that consumers are buying enough content where it can
further subsidize the device," Rubin said, adding that Amazon
has a "greater than usual incentive" to knock $60 off the
price.

"It's essentially selling a vending machine into consumers'
hands," he said.

In May, the company introduced a larger version of the
Kindle DX, designed to better view newspapers and magazines,
which remains at $489. The price on that device could also
drop, Rubin said.

The new $299 price tag on the Kindle puts Amazon's device
more in line with competitors' pricing. While earlier Sony
e-readers retailed for $399, the cost of more recent versions
has been cut to $299 and $279, according to Sony's consumer
website.

Still other devices entering the market are cheaper, such
as the $249 Cool-er from Interead.

Amazon shares rose $1.73 or 2.3 percent to close at $77.36
on Wednesday on the Nasdaq.
(Reporting by Alexandria Sage; Additional reporting by Brad
Dorfman; Editing by Richard Chang, Leslie Gevirtz and Matthew
Lewis)