Is It Too Late for Amazon to Kill Apple?
Jul 9th 2012 10:39PM
Updated Jul 9th 2012 10:44PM
It's starting to look like the aspirin aisle at a dollar store. Whoa! Check out all of these cheap tablets!
Next week's arrival of Google's $199 tablet and the potential for a slightly larger Apple device in the $300 range seem to leave Amazon.com's (NAS: AMZN) Kindle Fire out in the cold, but we all know that CEO Jeff Bezos hasn't sacrificed near-term margins and lucrative home-page promotional space simply to throw in the towel when it comes to its entry-level tablet.
A new Kindle Fire is inevitable, and it could be here sooner than you might think.
AllThingsDis hearing that Amazon is getting ready to refresh its Kindle Fire line as early as this quarter. After introducing its original $199 tablet in November, the updated version may be shipping as early as September. If so, this wouldn't be the first time we've seen this happen. There was just a 10-month gap between Apple's iPad and the iPad 2.
However, there wasn't a sense of desperation when Apple pushed its sophomore gadget so soon. For Amazon, sprucing up its Kindle Fire -- and doing so quickly -- is a matter of survival. The Nexus 7 will make similarly priced Amazon and Barnes & Noble (NYS: BKS) tablets seem like yesteryear's toys this month.
Google's tablet will have double the RAM, a stronger processor, and better resolution than the Kindle Fire and Nook Tablet. It also features GPS, Bluetooth, and a microphone. It may not seem fair to compare the Nexus 7 with the larger and far more expensive iPad, but it does offer a seemingly better front-facing camera and comes with an NFC chip.
Apple's new iPad should fare just fine, but Kindle Fire sales may very well come to a grinding halt next week.
Last year's hot plaything seems dated
The Kindle Fire was a holiday darling last year. Amazon doesn't reveal actual unit metrics on any of its Kindle products, but analysts and research firms believe that the leading online retailer managed to sell nearly 5 million tablets during last year's fourth quarter. It was an encouraging number for a product that didn't ship until halfway through the period.
Amazon's head-turning tablet was no match for the iPad 2, but it was the undisputed silver medalist in this space. However, things slowed down in a hurry after Santa and the early adopters went away. Hardware-sales tracker IDC reported that Kindle Fire shipments slipped from 4.8 million during the fourth quarter to a mere 750,000 during the first three months of this year.
There's little reason to believe that the trend is going to get any better, as Apple knocked $100 off the price of its iPad 2 a few months ago and the arrival of the Nexus 7 is imminent.
Go ahead and shout Fire in a crowded theater
Companies usually like to keep their updates quiet for as long as possible. It's just bad business to brag about upcoming products too soon, stalling sales of the current models that are still being sold. However, if Kindle Fire sales are already running sluggish -- and Nexus 7 is about to raise expectations of what tablet shoppers should get for $199 -- Amazon can't afford to wait or be silent.
There are certainly advantages to the original Kindle Fire, largely centered on the Amazon Prime membership program that gives folks paying $79 a year access to thousands of videos and monthly e-book rentals at no additional cost. However, that was the selling point for the first 5 million buyers. The next 5 million will need incentives that aren't necessarily tied to an annual subscription plan. Whether Amazon's vetted Android app store is a benefit or a disadvantage is debatable.
If Amazon doesn't speak up now, it won't be long before it simply retreats to its cheaper Kindle e-readers that have proved to be successful category leaders.
Instead of merely trying to fight Apple on price, Amazon now needs to fight Google on specs. Amazon needs to get better -- and louder -- soon.
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At the time this article was published The Motley Fool owns shares of Amazon.com, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Amazon.com, and Google, creating a bull call spread position in Apple, and writing puts on Barnes & Noble. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.
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