Amazon's new Kindle threatens Google

The most immediate impact of the Fire will be felt not by Apple, but by competitors such as Research In Motion, Motorola and HTC.

By Trefis Nov 16, 2011 5:38PM
Ever since Amazon (AMZN) announced in September it would sell its Kindle Fire for a mere $199, the tablet has drummed up a lot of interest from developers and consumers alike.

A recent study by Retrevo.com suggests that more people are interested in purchasing the Fire than Apple's (AAPL) tried-and-true iPad this holiday season. We believe this poses a bigger threat to tablets from Motorola (MMI), HTC and other carriers using Google's (GOOG) Android software.

About half of the developers surveyed by Appcelerator and IDC in North America said they considered the Kindle Fire their primary target, on par with interest for the iPad prior to its launch in April 2010. Pre-orders for Amazon's tablet have remained strong and the company may have recently increased its orders to more than 5 million units by the end of 2011. Amazon is shipping the Fire starting this week.


Early signs do indicate that the iPad's first true competitor may well have arrived on the scene. Lending more fuel to speculation that the tablet will suffer at the hands of its latest rival are rumors that Apple has asked suppliers to reduce shipments of supplies for its iPad and iPhone. Those rumors have weighed on the stock recently.


However, we maintain our price estimate of $502 for the Apple stock, which is about 30% above market price. Our estimate for Amazon of $233 is just under 10% ahead of the market price.


See our complete analysis for Apple |Amazon here


Kindle Fire more than just another Android tablet


The Kindle Fire has managed to captivate the consumer electronics industry with its $199 price point, significantly undercutting other tablets. The lower price point, coupled with Amazon's well-known brand and large media library, are poised to turn the Fire into the second hit tablet after the iPad.


There is no doubt that Amazon will shake up the market for tablets, possibly rendering the $500 tablet obsolete gradually. However, we feel that the most immediate impact will be felt not by Apple but by its competitors such as Research In Motion's Playbook and pricey Android rivals such as Motorola's Xoom and HTC's Flyer. Why spend $600 for an Android tablet from present Google partners if you can find most of what you need in a $199 Kindle Fire?


Apple's rivals in the tablet market are sizable but they haven't been able to significantly dent iPad's demand so far. However, most of these tablets, including Kindle Fire, run on Google's Android, which makes Google Apple's major competitor.


On the surface, Kindle Fire should be good news for Android as it runs on Android. The reality is that Kindle Fire is not a pure Android product. Amazon has taken some of the basic code of Android and built its own operating system on top of Android, thereby differentiating itself from the Android pack.


Amazon Kindle Units Sold

Fragmentation a key downside to Android


Fragmentation is the biggest enemy of any operating system. As time goes on and Google continues to develop Android in one direction while Amazon continues to take the Kindle Fire down its own unique path, the two platforms will be less and less alike, forcing developers to choose between Android and Kindle's OS. At some point in the future, Kindle Fire might pose a threat to other tablets running the very operating system it had once drawn its identity from.


Amazon is also not using Google Android Market. Appstore 2.0 from Amazon is fully integrated in Kindle and appears to be a much more user friendly implementation compared to Android Market from Google.


Apple's Average iPad Pricing

While Google and Android-based tablets face the biggest threat from Kindle Fire, Apple will eventually start to feel the effects of a lower-priced competitor. We do not see a 7-inch tablet providing an iPad-like user experience, but as tablets see mass adoption and the market matures to include customers who are far more price sensitive than the early-adopter crowd, Apple may well need to do a rethink on the iPad's price.


14Comments
Nov 16, 2011 7:49PM
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The Fire is nothing more than a glorified reader, designed primarily to consume Amazon content.  On the other end is the iPad.  Kind of a slick little device (and expensive).  Still, it won't do what I want it to do.  So far, I haven't seen a tablet that accommodates my needs with regard to syncing my personal data.  They all want me to adapt to their way of doing things rather than make the tablet adaptable to me.  I'm planning to use my notebook computer into the foreseeable future. 
Nov 17, 2011 10:51AM
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kindlemad  (or anyone):

can't seem to get a good answer on this.  does the kindle handle Flash?

 

That is my wife's bigest complaint about the ipad (we got it as a gift).  A lot of the sites she likes have flash on it and this is frustrating on an ipad.

 

I know why Apple doesn't like Flash, but wonder how Kindle (or any Android based tablet) handles it.

Nov 17, 2011 5:09AM
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The new nook app for Kindle is brilliant - you can get all the Android apps free now!  We got the nook app download instructions from www.kindlemad.com through google.

I love my new Kindle!
Nov 17, 2011 9:50AM
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Not sure from where these data is, but kindle's price is for a 7inch device and the dual core is not a high end one. Its a mere reader that is running on android. Unless its rooted, developers don't have a go to actually develop native apps for it.

 

I would wait for windows 8, its a better platform that will exist amongst most of the devices out there.

Dec 2, 2011 2:32PM
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Beware! KIndle Fire is a US only proposition. Amazon, for some obscure reason, does not let you download apps if you are outside of the US. Apple's iPad does not have that limitation.
I ordered a KF from Chile and I'm stuck.  I hope some clever programmer finds a way around this ****.
Nov 17, 2011 1:40PM
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@AgainstGovernmentWaste

It goes to show exactly how effective Apple's marketing has been when you assume that the tablet market consists only of iPads. I agree with you that, to the largest extent an iPad may seem like it is either an oversized iPhone, or a toy of sorts, but this is simply an opinion with a first blush glance. Compound that with the elite of the GED's (Google Experience Devices) like Motorola's XOOM, which have an even larger capacity for the power user, and I would like to seriously hear from you, what it is you believe that you CAN do on your laptop, that you think you CANT do on a tablet.

Unless you're a developer for Windows based applications, (which to some extent is possible with a simple text editor; tablet has? Check) and need to compile on the fly or while traveling, then the reality of it is, anything you CAN do on your laptop, you CAN do on a tablet.

Couch potatoes? I know personally I'm an avid outdoorsman and use the built-in barometer, GPS, compass, and 4G while trekking through places like the cascades and apalachian's in my XOOM to keep my entire journey well focused AND for life safety. With a built-in barometer, places that start to approach treeline and the mountains creating their own weather make it very unreliable from typical online weather broadcasts and very APPEALING to have a mechanism by which to garner that on-the-spot weather as well as the other functions of trekking AND corporate VPN capability et al, all in one device. I strongly suggest you keep from pigeon-holing others by your own assessment of their leanings if you want credibility as a forum commenter though. While I respect your opinion of the devices themselves, your obvious dislike of anyone who can find value in them soured my opinion of what you had said previously to it.

Nov 17, 2011 1:37PM
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You can already root the Fire.  Although, I don't believe there aren't any ROMS's available yet.  However, that is only a matter of time.  I mean the Cyanogen team released a working version of Android for the HP touchpad only 2 months after the HP firesale.  And that wasn't even running Android to begin with!  There will be custom ROM's for this by the end of the year that will make this as vanilla an Android experience as there is.

The point about fragmentation is moot.  Almost EVERY manufacturer that makes Android products overlays their own proprietary software on top.  HTC, Motorola, Samsung, everyone. 
Nov 17, 2011 11:47AM
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@Midwestmoderate

Android based tablets have an implementation of Flash (now) 11 on them. The Stock browsers for each device, whether it be smartphone or tablet, inherently uses the flash implementation as though you were using a standard browser from their desktop computer. A lot of third party browsers do not have the ability to use the same flash implementation, but most major ones (chrome mobile which is the stock browser on android devices, firefox is now implementating flash, and I hear that dolphin HD will or already has an offering) do or will.

When it comes to the Kindle, as with all bastardized implementations of Android, which could mean non stock ROM implementations or Kindles restructuring or overlay if you will, of the android OS ... whether or not their modified platform will implement flash is entirely up to them and what they do / dont decide to include. If they left enough of the OS alone and left browsing capability at stock, then likely it would handle flash as any other Android device would. But I cannot speak from firsthand knowledge.

Nov 16, 2011 9:09PM
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@ moneyhawk, The Ipad is nothing more than a glorified mp4/ video player. It can't handle MS Office or any actual work applications. So who is more of a moron, one who spends 200 dollars and more at Amazon, or one who spends 500 dollars and more at Apple?
Nov 17, 2011 11:51AM
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Tablets and kindles are toys for coach potatoes.   Nothing like picking up a REAL book and turning a REAL page.    I laugh when they market that you can take more books on vacation,  wow if you need that many books maybe take a vacation in a library?

Apple products are designed to look cool and do one thing, make money for Apple.  If you are a PC power user like me, their products are annoying and you realize real fast that their products are designed for the computer illiterate.

I'll never give up on my laptop where there's a REAL keyboard and you can get work done fast.
Nov 16, 2011 10:55PM
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Jon Garrett:
First off, I'm hardly a noob.  I've been using PC's since the first IBM PC was introduced with an 8086 processor.  How about you? 

Second.... what are you babbling about?  Apple fan boy?  I don't own any Apple products. 

If you want a Fire, go buy several and have a good time.  For my purposes, it's useless. 

Nov 16, 2011 10:59PM
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Michael Coats:
I'm not sure how to answer your "moron" question.  I don't have plans to buy either the Fire or the iPad so I guess I never contemplated the moron issue. 

Nov 16, 2011 9:11PM
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I don't like Laptops and doubtful about tablets. Until they can get the processing and video that my Desktop can play, I'll stick with a desktop for realworld and others for my shiny, (look I'm more important than you toy).
Nov 16, 2011 8:49PM
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@moneyhawk

you're a noob, an apple fan boy and you dont know squat. the Fire runs Android and it's much more than a glorified reader and even if it was, people are choosing it over the iPad so that tells you a lot about how tired people are of iDevices which don't offer much.

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