..in comparison with the iPad, the Kindle Fire has a 33 percent smaller display, no cameras, no 3G wireless, less memory and only two-finger multi-touch (thus limiting its gaming capabilities).
Further, Amazon has the unique ability to make this a 'razor blade' type of business as they can make small profits on the hardware and make more money on increased sales of movies, music, and the like.
I am surprised by the price action in AMZN today - I didnt think this was a surprise as everyone knew there was a product coming this fall in time for the Christmas season. Maybe the price point of $199 rather than the estimated $250 was the main surprise today.
The WSJ takes a look
- Priced at $199, the Fire tablet has a 7-inch screen and can access Amazon's app store, streaming movies and TV shows, the company said. By comparison, the lowest price for a new iPad is $499. The Kindle doesn't offer a cellular connection, working only with Wi-Fi. It also doesn't have a camera or microphone.
- Mr. Bezos noted that all the content on the Fire will be backed up remotely on Amazon's servers at no cost to the consumer.
- Questions, though, remain about the device's technical limitations and lackluster selection of apps, especially in comparison to the iPad.
- Nonetheless, Janney Capital Markets analyst Shawn Milne expects between 2 million and 3 million tablets will be shipped in the fourth quarter before the analyst expects a beefed-up version, possibly with a 10-inch screen and dual processor, to become available early next year.
- Amazon, though, appears to be following the same formula that has helped to make its Kindle the de facto standard for dedicated e-readers and the bestselling product in Amazon's history. Specifically, with the new tablet, Amazon is offering an attractively priced device with basic, easy-to-use features, and accompanied by an intense promotion campaign on the company's heavily visited website.
- "Amazon has an advantage that other tablet manufacturers don't in that millions of people already visit its site on a regular basis," said Ken Sena, an analyst who covers Amazon for Evercore Partners. He added that those consumers will be regularly exposed to advertisements for the device. "It certainly creates a competitor to the iPad," Mr. Sena said.
- So far, iPad rivals have struggled to compete with the device's price, functionality and popularity. As a result, competitors like Research In Motion Ltd.'s PlayBook, Hewlett-Packard Co.'s TouchPad, Samsung Electronics Co. Ltd.'s Galaxy Tab and Motorola Mobility Holdings Inc.'s Xoom have failed to attract mass audiences.
- Amazon's Fire tablet, meanwhile, is seen benefiting from the company's relationships with various content providers. The tablet will have access to more than 100,000 movies and TV shows; 17 million songs; 1 million books; and hundreds of newspapers and magazines.
- Another advantage is Amazon's long-standing relationships with consumers, who give the company sensitive information, including email addresses and credit card information. That will make it easy for Amazon to market additional products for its tablet, as well as charge for them.
- In addition, by linking Amazon's Prime membership with the tablet, the company could help its core retail business. Prime members, who receive free shipping on products purchase, spend four times the amount of the typical Amazon customer, Janney's Mr. Milne said.