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First-generation iPad Air remains, price dropped to $399 to start

Apple might be offering a new iPad Air to customers, but the company has decided to keep its existing tablet in place for those seeking a cheaper option.

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Apple's first-generation iPad Air has been replaced by the iPad Air 2. Tim Stevens/CNET

While Apple might be looking to the future with a new iPad Air featuring everything from improved internal components to the inclusion of its Touch ID fingerprint sensor, the company is not yet ready to say goodbye to its last-generation slate.

The 9.7-inch iPad Air will remain available for a starting price of $399. Apple is offering two versions -- Space Gray and Silver. The company is also offering only two storage options: 16GB and 32GB. The Wi-Fi-only versions go for $399 and $449 for the 16GB and 32GB models, respectively, while the cellular options featuring 4G LTE connectivity go for $529 and $579, respectively.

Thursday's event marks the second product launch for Apple in as many months. The company in September showed off two larger iPhones and provided a glimpse of the Apple Watch during a flashy event that featured the band U2. Thursday's launch is a much smaller and lower-key affair, held at Apple's headquarters in Cupertino, Calif.

Though the iPhone remains Apple's dominant revenue engine -- contributing to more than half of its sales -- the company is eager to bolster its other businesses. Front and center is the iPad. The tablet may be Apple's second-biggest moneymaker at about 15 percent to 20 percent of revenue, but the device hasn't been selling as well as it used to. Apple now faces questions over whether the iPad's declining shipments are a temporary hiccup or a troubling trend.

At the same time, Apple's Mac business remains important to the company, particularly as Apple makes its various devices work better together. While Apple has spoken against hybrid devices that switch between computers and tablets, its new computer operating system, OS X Yosemite , includes features that allow users to "hand off" tasks. That includes letting users start a task -- such as writing an email or composing a text -- on an iPhone and then finish it on an iPad or Mac.

Apple's iPhone has continued to sell well, but a weak area for the company has been the iPad. Though it remains king of the tablets in terms of market share, sales of the iPad have declined year-over-year and fallen short of analyst expectations for two straight quarters. In Apple's fiscal third quarter that ended June 28 -- the most recent period the company has reported -- iPad sales dropped 9 percent from a year earlier to 13.3 million, below the 14.4 million expected by analysts. Its market share also slipped in that period, from 33 percent to 27 percent.

Apple has attributed the weak iPad sales to a couple of factors -- softer demand and an issue with the number of devices held in channel inventory (which means it's either sitting in stores or on trucks).

In reality, Apple likely has been hurt by a few factors that could continue to plague iPad sales. It's easy for people to pass older tablets to relatives or friends when they upgrade. People also don't have the two-year upgrade incentive that smartphones get from wireless carriers, and Apple hasn't made big enough changes to the iPad to compel even its most ardent fans to immediately buy the newest model. In addition, most people who crave a tablet likely already have one, and Apple is going up against dozens of new, inexpensive devices that run Google's rival Android mobile operating system.

Apple CEO Tim Cook in July said he's "bullish" about Apple's prospects in the tablet market. "We still feel the category as a whole is in its early days, and there's still significant innovation that can be brought to the iPad and we can do that," he said.

Cook expects Apple's new partnership with IBM, announced in mid July, to boost iPad sales. Already, most of the Fortune 500 companies use Apple products, but there are still a lot of ways the company could generate more money from business users. Apple and IBM will work together on pushing Apple devices and iOS apps with business users, and IBM's cloud computing services -- such as device management, security and analytics -- will be optimized for iOS.

Apple previously sold the iPad Air from $499 for the 16GB WiFi-only version to $929 for the 128GB iPad Air with WiFi and cellular capabilities. The company has in the past sold older versions of its iPad for $100 less than the equivalent newer models. Its 9.7-inch, fourth-generation iPad with retina display was previously available with 16GB for $399 for WiFi only or $529 for WiFi and cellular.


Apple iPad 1 Wi-Fi