The intense competition between Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) in the tablet market shows the effectiveness of Amazon’s tablet strategy and proves its ability to carve out a niche in the otherwise iPad dominated market. According to a recent report, Amazon may launch a 9-inch Kindle Fire later this year, in addition to the 7-inch version that it currently sells.  We believe this could be a good move by Amazon as a larger screen size provides a better user interface experience. This will also put Amazon in more direct competition with the 10-inch screen iPad, and given the gap in its price point, Amazon could attract more buyers to its tablets and take some of the anticipated momentum from the iPad 3 launch. This year could well see Amazon cement its position as the only other real tablet contender vs. Apple as other players such as Research in Motion (NASDAQ:RIMM) and Motorola Mobility (NASDAQ:MMI) scrap future tablet plans.
Our $550 price estimate for Apple stock is about 10% above the current market price.
9-Inch Kindle: A Good Strategy by Amazon
Steve Jobs had famously once proclaimed that competitors’ 7 inch were “Dead on Arrival,” citing that tablets should have a minimum 10-inch screen for optimal user interface experience (see Do 7-Inch Tablets Stand a Chance?). Part of this stemmed from the fact that the 7-incher is a tweener — too big to be a smartphone and too small to be an effective tablet. If Amazon indeed comes up with a 9-inch tablet, it will be a significant design change from the current 7-inch version, and may pump up Kindle sales even further.
Given the price different historically between iPads and Kindle Fires, the Kindle Fire could stimulate additional tablet demand as the lower price points while taking some potential iPad converts. This may ultimately drag on the momentum we have come to expect with new iPad launches. We discussed the impact the iPad 3 could have on existing Kindle Fire sales in our note Can the iPad 3 Kill the Kindle Fire?
What do you think?Notes:
- Fire in the Hole! Amazon May Ship 9-Inch Kindle by Midyear, AllThings D, February 9th, 2012 [↩]