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(Reuters) –
Google Inc has fixed some shortcomings in its tablet computer strategy,
as the Internet search giant steps up efforts to break into a nascent
market dominated by Apple.

Google showcased on Wednesday
the first version of its Android software designed to run on tablets
with larger screens and greater computing horsepower, allowing for a
sleeker and theoretically faster interface with built-in video
conferencing.

The company also introduced a new way for developers to make money by building applications that run on Android.

The
changes ratchet up the competition in the fast-growing tablet PC
market, for which Hewlett-Packard and Microsoft are also developing
rival software.

Analysts said
"Honeycomb", while addressing a couple perceived flaws in the operating
system when used for tablets as opposed to smartphones, was unlikely to
immediately shift the balance of power.

"It
closed the gap quite a bit," said BGC analyst Colin Gillis. But, he
said "there was nothing there that was going to make me wait in line
overnight," referring to the lines of customers who waited outside
retail stores when Apple introduced the iPad in April.

Google
said at an event at its Mountain View, California headquarters on
Wednesday that Android developers would now be able to sell consumers
goods from directly within their apps, a key capability Apple introduced
more than one year ago.

And it has
started a Web version of its applications store for Android devices,
which will help developers hawk their software applications to a larger
audience. Previously, Android apps were available only through client
software on devices.

iPad Still Leads

Apple,
which some analysts expect will unveil a new version of its iPad later
this year, has shipped 14.8 million iPads since April. But it lost its
early lead in the smartphone market to Android, which Google gives away
to hardware vendors and which became the No.1 smartphone operating
system in the fourth quarter, according to research firm Canalys.

Whether
Google can do the same in the tablet market will depend on the support
its new "Honeycomb" gets from manufacturers, wireless carriers, and the
armies of developers who build applications like games and productivity
tools.

Google now has more than 100,000 apps available for Android devices, versus Apple’s catalog of more than 300,000.

"There
really wasn’t much of a competitive playing field so far" in the tablet
market, said Soumen Ganguly, a principal at management consulting firm
Altman Vilandrie & Co, who noted that previous versions of Google’s
Android were well-suited to smartphones but not ideal for the
bigger-screened tablets.

With the
introduction of Honeycomb, Ganguly expected that every major
manufacturer would introduce at least one Android tablet by the end of
the first half of the year.

Motorola Mobility’s Xoom, which Google showcased at its event Wednesday, is due to ship in the first quarter.

But Display Search analyst Richard Shim said there were still unanswered questions, including the price of Honeycomb tablets.

Shim
said his firm expects industry-wide shipments of 55.7 million tablet PC
in 2011 and that, even after seeing Wednesday’s Honeycomb
demonstration, he still expects Apple to hold the majority market share
this year.

"This put them at the table," he said of Google. "What we’re seeing here is a good foundation."

(Editing by Bernard Orr)