Amazon Kindle Fire ‘not an iPad competitor’
Published 29/09/2011 | 10:53
Amazon’s new Kindle Fire will drive tablet computer sales, but analysts believe it will cost Amazon $50 per unit and not seriously compete with Apple’s iPad
Amazon’s new Kindle Fire tablet computer has met with a mixed reaction from analysts and commentators. The device, launched in New York yesterday, marks Amazon’s first attempt to extend its success with ebooks and its original Kindle ereader into films, TV programmes and music.
Jeff Bezos, Amazon’s founder and Chief Executive, said the full-colour, touchscreen device, would be a premium product “at a non-premium price”, and called the new Fire “an incredible achievement”.
Analyst Gene Munster at Piper Jaffray argued that the device, which runs on Google’s Android software, will drive sales of tablets using the operating system next year. But he added that the iPad would still outsell Android devices by two to one.
Munster said the Kindle Fire’s 7” screen size put it at a disadvantage to the iPad’s 10” format. Amazon, however, has seen its Kindle sell well because its similar small size makes it more portable. The new device’s low price, at $199, is also likely to be appealing to consumers, Munster conceded. Adam Leach at Ovum said that “The pricing is critical to gain traction in the tablet market. Rival manufacturers have failed to attract consumers as they have matched the iPad's price point without matching its content offering."
Amazon was likely to be losing $50 per device, Munster suggested, in anticipation of using the devices to sell more content to consumers. “Apple is also monetizing the hardware upfront with a 30 per cent+ gross margin on the iPad, whereas Amazon is likely losing about $50 per Kindle Fire”, he said.
Forrester analyst Sarah Rotman Epps, however, said that Amazon’s tablet strategy would succeed. She praised the company’s approach, writing that “Amazon is competing on price, content, and commerce. The Kindle Fire will retail for $199—less than half the price of the iPad”.
Rotman Epps added, however, that “Amazon still lacks a convincing global strategy compared with Apple. At launch, the Kindle Fire will only be available in the US. The iPad is available in 64 countries, and we estimate that 50% of iPad sales in 2011 are outside the US.”
Amazon has yet to say anything on UK availability of the Kindle Fire in the UK; of its announcements yesterday, only the new, lighter update to the original Kindle has so far been launched in Britain.
Amazon’s strength, however, is likely to be formidable over the long term. Brian Blair, an analyst at Wedge Partners Corp. in New York, told Bloomberg, that “Amazon is really the only other guy, the only other potential tablet player, that has a similar offering to what Apple has,” Blair said in an interview last week. “If you look across their product offerings, they have content that none of the other tablet makers currently have because they have content on the media side.”
Rotman Epps also said that “Amazon will sell millions of tablets, and the rapidfire adoption of the Kindle Fire will give app developers a reason—finally—to develop Android tablet apps. Apple’s place as market leader is secure, but Amazon will be a strong number two, and we expect no other serious tablet competitors until Windows 8 tablets launch.”