5 Things You Need to Know About Amazon's New Tablet

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The Amazon.com (AMZN) tablet is finally happening.

The leading online retailer showed off its Android-powered device this morning. Kindle Fire should be a hot -- pardon the pun -- item this holiday season, but let's go ahead and break this down into five important takeaways, as you ponder the decision to buy or pass on Amazon's latest gadget.

1. It's cheap
It was widely assumed that the tablet would be priced somewhere between Barnes & Noble's (BKS) $250 Nook Color and Apple's (AAPL) $500 iPad 2.

Amazon is shocking the market with a $199 price tag. It's not fancy. It doesn't come with a camera or a microphone. However, it's ridiculously cheap even for a rudimentary tablet. Instead of simply leaning on its brand and marketing muscle to push out a device to compete with the $250 Nook Color, Amazon is blowing Barnes & Noble out of the water.

2. It's small
Steve Jobs has famously referred to devices with screen sizes between 5 inches and 7 inches as "tweeners." They're too big to be pocket-friendly smartphones. They're too small to be multimedia-friendly tablets.

Kindle Fire's 7-inch screen is going to be small for those used to the iPad's nearly 10-inch screen, but it is larger than the traditional Kindle's 6-inch screen. It's still a lot of bang for the buck, and supply chain watchers have been pointing to Amazon releasing a larger 10-inch version early next year.

3. It's flexible
Some analysts are already tagging Amazon's tablet as Apple's biggest competitor for 2012 -- and that was before the mainstream-gunning $199 price became public this morning.

Tablet manufacturers that have tried to go big on specs -- and price tags -- have fallen flat against the iPad. Amazon is going smaller and more bare-boned, but it's a lot more flexible than its shortcomings would seem to suggest.

For starters, beyond the obvious Kindle bookstore connection, Kindle Fire also plays nicely with Amazon's digital music and video storefronts.

Video will be a big winner here, since Amazon is including a 30-day free trial of Amazon Prime -- it's a $79 a year service that provides free two-day shipping and subsidized overnight deliveries on any Amazon-warehoused merchandise.

A key element of Prime is access to Amazon's growing catalog of streaming movies and videos at no extra cost. In other words, if you buy a Fire you'll have Wi-Fi access to what is now 11,000 titles for the first 30 days (and beyond for those who are or will become paying Prime members).

For those seeking fresher content, 100,000 digital videos and 17 million digital songs are available for purchase, and it all plays into Amazon's growing cloud-computing platform.

4. It won't be as easy to get as you think
With the rush to get a tablet out before the telltale holiday shopping season, many believe that there won't be enough production to keep up with demand. The original Kindle had this exact problem four years ago. Amazon was quick to brag about selling out within hours of its launch, but in reality it was because only a small number of the early e-readers were actually available to sell.

We'll see how this plays out.

Amazon claims to be ready this time. "We're making many millions of these, but I still recommend you preorder today," CEO Jeff Bezos suggested during this morning's rollout.

No matter how anxious you may be to get your hands on this $199 device, you will have no choice but to wait. It won't begin shipping until mid-November.

5. It may pay to wait
Scarce supply and ample demand may find buyers scrambling to resale markets, but don't overpay on eBay just yet.

Some reports circulating this week are suggesting that the rush to have a cheap tablet out in time for this holiday season is just a placeholder. A better version may come out early next year. There's an even stronger possibility of a 10-inch model, for those who want a more iPad-sized tablet experience.

Amazon also has a history of slashing prices on the Kindle e-reader. It debuted at $399 four years ago. There have been several price cuts along the way, and today the non-touch Kindle e-reader has come all the way down to as little as $79.

Don't expect such drastic price cuts this time around. Amazon knows that you only get one big swing at the tablet market, which is cornered by Apple. The $199 price is compelling enough that Amazon won't need to nibble away at its margins to deliver even cheaper Kindle Fire units in the near future.

The price may not change, but better -- and likely pricier -- versions may be coming soon. Unless you want to wait for what may or may not materialize next year, following Bezos's advice to preorder one now is probably the best call.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.


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4 Comments

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Alex

I don't see any mention of a keyboard or on screen keyboard on the Kindle Fire advertising or on Amazon's website. It does say you can check your email, but says nothing about having the ability to respond to your email. It would be a huge mistake not to include some type of keyboard. Maybe this is part of the marketing staragy to get you to upgrade later. Any thoughts out there?

November 06 2011 at 6:20 PM Report abuse rate up rate down Reply
ericstratn

Actually this is genius marketing. They chose not to directly compete with the iPad and instead souped up a color Kindle with wifi and a browser and all the useless apps you can find. They are playing to their base as an upgrade to kindle. Yes it will take a few sales from Apple and get them established as a tablet competitor. But we have seen the marketplace littered with those who went directly at the iPad. The 10" pad will follow as they build up their cred. Is it an iPad killer? Nope then again what is?

September 30 2011 at 11:46 AM Report abuse rate up rate down Reply
Owen

I THINK I'LL STAY WITH MY IPAD, THANK YOU

September 28 2011 at 9:21 PM Report abuse rate up rate down Reply
ccdae5

Bring it on, I need six for Christmas!

September 28 2011 at 7:20 PM Report abuse +1 rate up rate down Reply
doc313

6. NO 3G. Can't access web on train, bus, beach, park, etc.

September 28 2011 at 2:57 PM Report abuse rate up rate down Reply