Following its launch, Amazon’s new Kindle Fire HD offers various options at an aggressive pricepoint. However, many industry watchers believe that Apple’s iPad will remain the market leader, especially that the so-called iPad Mini is expected to be unveiled this fall.
Meet the New Kindle Fire HD
The online retailer announced its new Kindle Fire HD last Thursday, stating that the device is an improvement of its predecessor. Amazon also suggested that the new tablet could provide stiff competition for the Google Nexus 7 and Microsoft’s upcoming Surface.
According to Shaw Wu of Sterne Agee, Amazon’s new lineup, which is led by the 8.9-inch Kindle Fire HD, is “ambitious.” It can make it more difficult for Samsung, HTC, and Research in Motion to gain traction in the market.
We believe the Nexus 7, which has seen strong sales since its introduction in mid-July, could see competitive pressure with the new 7-inch Kindle Fire HD, which has the same price point at $199 but sports an additional 8 GB of storage for a total of 16 GB.
An even greater pressure is placed on the upcoming Microsoft Surface. Wu believes that the software giant needs to price its Windows 8 tablet at $299 or lower if it wants to thrive in the market. However, market watchers don’t think that the Amazon Kindle Fire HD will have an effect on Apple’s iPad.
Kindle Fire vs. iPad
According to Wu, no tablet maker other than Apple will be profitable because of Amazon’s aggressive pricing. In addition, he is unsure about the online retailer’s content reselling business models.
We question the company’s stance where it believes it can make profits on content is the right business model, as reselling someone else’s content has historically proven to not be very profitable venture.
In relation to this, Wu noted that Apple is making little profit from iTunes and the App Store. On the other hand, Topeka Capital Markets’ Brian White weighed in and said that Amazon’s new Kindle Fire lineup will be no match against the iPad. He even added that investors must “sit back, relax, and wait for the ‘iPad Mini’.”
Apple still rules the tablet world, and we believe the soon-to-be-launched ‘iPad Mini’ at a $250-$300 price point (possibly a bit lower) will expand the company’s addressable market opportunity significantly with a 7.85-inch tablet and potentially even surpassing sales of the regular-sized iPad.
White believes that a smaller iPad will provide Apple with a larger market that it can address, which could potentially boost its sales in developing countries and in education sector.
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