Amazon's iPad killer?

If you've been holding out on buying an iPad in hopes of a more viable competitor, your time has come

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If you take one thing away from the unveiling of's new tablet it should be this: When Jeff Bezos unveiled the price at today's press conference, the person sitting next to me gasped.

Only $199 for that sharp-looking of a tablet?

If you've been holding out on buying an iPad in hopes of a more viable competitor, your time has come. Today, Amazon unveiled its new Kindle Fire. I was at the press conference where the tablet was unveiled and will have more analysis below, but first, the details:

  • Price: Amazon's tablet comes in at $US199, which is only 40% of the entry-level iPad price. That's an attractive price point, but it also comes at the expense of some hardware limitations listed below.
  • Hardware: As predicted, the Kindle Fire looks quite a bit like Research In Motion's PlayBook tablet. That shouldn't be surprising since Amazon reportedly outsourced hardware design to Quanta, the company that manufactures the PlayBook. The screen is 7 inches, a size that's quite a bit smaller than the 10-inch screen size Apple uses in iPad designs.

The tablet also lacks a camera, there's no mention of HDMI out support, and it is Wi-Fi only, meaning users won't have the option of getting 3G data service. For some, that will be a deal-breaker.

  • Internals: If you were hoping for a next-generation processor like NVIDIA's new five-core Kal-El processor, you're out of luck. But hey, this thing costs $199; what do you expect? The demo looked zippy, however. And the company did announce it uses a dual-core processor. My money is on an OMAP processor by Texas Instruments powering it. Storage is a meager 8 GB; Amazon repeatedly emphasized cloud-based storage.
  • The interface: Amazon's tablet runs on Google's Android, but this ain't your father's Droid. The user interface is unique to Amazon. Media and recently used apps stream in a "carousel." It's a novel approach that's distinct from other Android tablets.
  • Kindle name: Amazon is using the wildly popular Kindle branding to sell the tablet, but the tablet will feature a conventional backlit LCD screen. If you're a Kindle fan because of its E Ink technology that's easier on the eyes, Amazon also unveiled a Kindle Touch 3G for $US149, a Kindle Touch for $US99, and a non-touch Kindle for $US79.
  • Added services: The main emphasis was on other services you get with the Kindle Fire. It's a unified package that effortlessly combines Amazon's cloud-based storage options, its digital downloads and streaming services, and even leverages Amazon's famed EC2 cloud-computing platform to reduce strain on the processor and make Web browsing more snappy.

The advantages
The obvious importance of Amazon's tablet is that Apple finally has a competitor in the tablet space that attacks some of its core strengths. Amazon isn't failing to undercut Apple like other (failed) rivals have. It's going for an entirely different price segment. Also, Amazon is really focusing on its media offerings. Poor media management has long been a failing of Android offerings in general and will offer something unique that can compete with iTunes and its grip on digital distribution.

The potential
Last quarter, Apple moved 9.2 million iPads, and in the face of several highly promoted tablet launches with large marketing budgets, grew its market share. The number of iPads sold will only accelerate this holiday season. The hope for Amazon investors is that the Kindle Fire will ride aggressive pricing, marketing, brand recognition with the Kindle name, and its unique offerings — which make it distinct from other Android tablets — to become the clear No. 2 behind Apple in coming quarters.

That should be an obtainable goal. Other Android tablets are falling flat and Amazon is offering the best-priced Android tablet (you'd actually want to buy) with the best bundled options. Yes, some missing features will turn users off, but the lower price point will attract more. It's clear Amazon had to cut some corners on the hardware end. Development work was clearly focused on the software side, and that was the right call to best utilize the company's strengths while getting the tablet to market in time for the holiday season. Make no mistake: This is a low-margin Trojan horse to pick up mind share in the tablet race before the game is over.

For Amazon, a tablet is a natural fit for many of its initiatives and has limited downside. Amazon has put big bets behind delivering digital media, but has seen its market share stagnate. For example, in online video-on-demand, even Wal-Mart's Vudu has caught up with Amazon's market share, while Apple continues to control 66% of the market. Apple has proven that consumers prefer consuming digital content in the mobile space. For Amazon, this is a natural package for pushing several initiatives it has already placed tremendous resources behind. It's an extension of where the company has been headed for years.

So don't judge the Kindle Fire as the "iPad Killer" yet, because in the short run, it will fail to live up to the hype. The key point is that it doesn't need to "kill" the iPad to be successful. By proving itself as the established leader in Android tablets, the company will get more than a good return on its investments even if the space is evenly split. Amazon will increase engagement across its services, and drive adoption of Prime — a service which drives the holy grail of Internet companies — reliable, low churn, recurring revenue.

iPad Killer? No. Great product that will rule the Android tablet world? Yes.

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