This product is in a very niche market with very limited targeted consumers I would think. Netbooks, laptops, smartphones, and current tablets have covered the market pretty much. No doubt there is demand for such a device, but that demand doesn't necessarily translate into a very profitable venture for Apple. Apple's tank in share price somewhat reflect consumers and investors thought of their new undertaking and had their hopes up too high of what value Apple can bring to the table.
I read rarely, if at all. If I am interested in a book I'd buy a physical copy. Kindles, netbooks, tablets don't really fit into my life, which mainly revolves around being at work all the time. The few hours of spare time I have I spend at home either on TV, on the computer, or on the iphone when I want to surf lightly in bed prior to going to bed. When I'm mobile on the road I use the iphone for internet connectivity. Flash is a nonissue for me.
The iPad design can no longer ride on the design of previous Apple devices, nor can the UI interface. It doesn't offer the appeal that a new device should have to have that punch line to attract attention and eyes of potential buyers. I look at the iPad and I go "meh", doesn't look like anything I haven't seen before from Apple, boring.
Not having a webcam is a downer. How one can use and rest the iPad is also an issue as well. I will certainly not spend $500+ on a secondary device that doesn't do anything better than what I already have in place. Besides weight and physical size it doesn't have much appeal, imo.