Amazon.com Inc, the world’s largest online retailer, unveiled its Kindle Fire tablet computer, taking aim at Apple Inc’s bestselling iPad with a device that’s smaller and less than half the price.
The Kindle Fire will have a seven-inch display and cost $199, compared with $499 for Apple’s cheapest iPad, said Amazon executives. The device, a souped-up version of the Kindle electronic- book reader, would run on Google Inc’s Android software, the Seattle-based company said.
Chief executive officer Jeff Bezos is betting he can leverage Amazon’s dominance in e-commerce to pose a real challenge to Apple’s iPad, after tablets from rivals such as Hewlett-Packard Co and Research In Motion Ltd have fallen short. Sales of Amazon’s electronic books, movies and music on the device may help make up for the narrower profit margins that are likely to result from the low price, said Brian Blair, an analyst at Wedge Partners Corp in New York.
“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.”
Amazon shares rose $8.59, or 3.8 per cent, to $232.80 at 9:47 am New York time on the Nasdaq Stock Market.
Apple rose $3.46 to $402.72. Shares of Barnes & Noble Inc, maker of the Nook e-reader, fell 51 cents, or 3.9 per cent, to $12.70, on the New York Stock Exchange.
Tablets Surge
The Kindle Fire doesn’t have an embedded camera or a microphone. The device offers Wi-Fi connectivity, though not 3G access, and comes with a 30-day free trial of Amazon Prime, the company’s $79-a-year membership service that includes streaming video and free two-day shipping.
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Amazon has painted over the rough surfaces of Google’s Android operating system with a fresh and easy-to-use interface and tied the device closely to its own large and growing content library of movies, magazines and music. Cambridge, Massachusetts-based Forrester Research Inc predicts the tablet market would grow 51 per cent a year through 2015.
While the new Kindle would add to Amazon’s sales, estimated by analysts to rise 32 per cent to $64.6 billion in 2012, the company may disappoint if the tablet doesn’t bring in revenue quickly, Steve Weinstein, an analyst at Pacific Crest Securities in Portland, Oregon, said in a note this week.
Consumer Reaction
Consumer reaction to the device would play a “critical” role in the company’s growth, he said. Analysts, on an average, predict Amazon’s gross margin, a measure of profitability, would fall to 22.17 per cent in 2012 from 22.35 per cent last year, according to a Bloomberg survey. Gross margin is the percentage of sales left after subtracting production costs.