San Jose, Calif. ? Apple is poised to once again revolutionize the entertainment industry — this time with an “iTablet” portable device that lets users download and read digital books, watch movies and play games while also sparking new consumer interest in music albums packed with material such as video clips and liner notes, according to a new report.

The touch-screen Internet-connected gadget, which the company could launch before the holidays, aims to do what Microsoft failed to accomplish and would instantly compete with Amazon’s Kindle, Sony’s Reader and a soon-to-launch device from Barnes & Noble, the Financial Times reported Monday. The iPod touch-like device is expected to have a 10-inch screen.

Analysts and bloggers have talked at length about an Apple tablet device, with many pointing to an early 2010 launch.

Some have speculated the new product would be an extension of Apple’s iPod line, which owns 70 percent of the North American market for digital music players but is starting to lose momentum. Last week, the company said iPod sales sagged 7 percent to 10.2 million during the quarter that ended in June as compared with the same period a year ago.