If Apple wasn’t scared of Amazon before, it better be now


Wow.

That’s all I can say after Amazon.com’s (Nasdaq: AMZN) announcements yesterday. We knew the e-tailer was set to unveil upgraded Kindle Fire tablets, but we weren’t exactly sure how many, or other pertinent details. Of all the major tech events this month hoping to steal attention from Apple’s (Nasdaq: AAPL) iPhone unveiling, this one is now the top contender.

“People don’t want gadgets anymore. Check out our new gadgets!”
Jeff Bezos took the stage, and started off the presentation by pointing out how no one buys other Google (Nasdaq: GOOG) Android tablets, even though over two dozen were launched last year. He attributed this to the notion that consumers don’t want gadgets anymore. No, instead they want services, ones that improve over time, in an unsubtle nod to Amazon Prime. “Kindle Fire is a service,” he added.

In a sense, this aptly sums up competition among Android tablets over the past year in one succinct sentence. Other Android tablets had beefier specs, but less compelling content offerings. The first Kindle Fire was absolutely lacklustre in just about every hardware spec imaginable, but was backed by Amazon’s wide plethora of content services, and proceeded to outsell them by a large margin. That shows just how important the service component really is.

Ironically, after saying people don’t want gadgets anymore, Bezos went on to unveil a whole slew of … gadgets.

“Hardware is a critical part of the service.”
Of course, you need a physical manifestation to serve as a content portal, with Bezos acknowledging that “hardware is a critical part of the service.”

First up was the new Kindle Paperwhite, which features a subtle backlight, and improved resolution, so you can read in low-light environments. It’s an obvious response to Barnes & Noble’s Nook Simple Touch with GlowLight and, in characteristic Amazon fashion, undercuts the rival device by US$20. Adding 3G will cost an extra US$60. The regular Kindle got some incremental bumps and a US$10 price haircut, to just US$69.

But no one was there for the regular Kindles, were they? No, the main flame was the Kindle Fires.

The main flame
The current Kindle Fire got a minor bump, vaguely claiming that it sports a faster processor, double the RAM, and 40% faster performance. It also received a price drop to US$159. The new models are called the Kindle Fire HD, and they come in both 7-inch and 8.9-inch sizes. Both feature, you guessed it, HD resolutions and other improvements.

Kindle Fire HD 8.9”. Source: Amazon.

Surprisingly, Amazon did not opt to go with a quad-core NVIDIA (Nasdaq: NVDA) Tegra 3, as most had suspected and, also, as Google went with in the Nexus 7. Instead, the company again tapped Texas Instruments (Nasdaq: TXN), featuring an OMAP 4 chip inside. It’s an OMAP 4470, a similar but upgraded processor compared to the OMAP 4430 used in the first Kindle Fire. Bezos even touted some benchmark stats showing that the OMAP outperforming the Tegra 3.

The new tablets also gets dual stereo speakers, and Bezos took a direct shot at the iPad by saying the “standard today” is one speaker with mono sound, while displaying a picture of an iPad. The 8.9-inch model is clearly aimed at the iPad, and the 7-inch flavour has the Nexus 7 in its sights. Here’s how the new models stack up.

Specification Kindle Fire HD 7” Nexus 7 Kindle Fire HD 8.9” iPad 3
Screen size 7-inch 7-inch 8.9-inch 9.7-inch
Resolution 1280 x 800 1280 x 800 1920 x 1200 2048 x 1536
Pixel density 216 ppi 216 ppi 254 ppi 264 ppi
Processor TI OMAP 4 NVIDIA Tegra 3 TI OMAP 4 Apple A5X
Storage 16 GB / 32 GB 8 GB / 16 GB 16 GB / 32 GB 16 GB / 32 GB / 64 GB
Price US$199 / $249 US$199 / $249 US$299 / $369 US$499 / $599 / $699
Sources: Amazon, Google, Apple.

Strictly on the hardware front, Amazon now has the Nexus 7 beat by offering greater storage at the same price points. Just when the Nexus 7 was starting to gain traction, Amazon’s provides a strong response.

But wait! There’s more! Amazon is turning up the heat with 4G LTE, also. This surprised me, because most tablet makers have been averse to working with carriers wherever possible; but Amazon is offering aggressive data plans through AT&T. It was somehow able to finagle massively discounted service plans, albeit with a very limited data allowance. You can get 250 MB per month for 12 months for a one-time payment of US$50.

Specification Kindle Fire HD 8.9” 4G LTE iPad 3 4G LTE
Storage 32 GB / 64 GB 16 GB / 32 GB / 64 GB
Price US$499 / $599 US$629 / $729 / $829
Monthly data allowance 250 MB 250 MB / 3 GB / 5 GB
Annual data service cost US$50 US$180 / $360 / $600
Sources: Amazon, Apple. Data prices shown are for AT&T’s network and assume data is purchased for 12 months.

The device itself costs more with LTE support, but still remains cheaper than the iPad. The 250 MB limit may suffice for casual consumers who travel infrequently, but data-hungry road warriors would most definitely need more.

iScared?
This is a major assault on both Google and Apple, as Amazon is aggressively targeting nearly all price points, ranging from US$159 to US$699, with everything covered in between. It’s offering a compelling value proposition, bundled into its service and ecosystem offerings. As the dominant incumbent, Apple has the most to lose if Amazon succeeds.

If Apple wasn’t scared of Amazon yet, it better be now.

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The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by Evan Niu, originally appeared on fool.com

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