Amazon’s Kindle Fire is Cheap But No iPad Killer

September 29th, 2011 by Trefis Team
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Amazon (NASDAQ:AMZN) unveiled the 7-inch Kindle Fire tablet on Wednesday for a $199 price tag, less than half of the lowest version of iPad version that comes for $499. [1] Some may believe that Kindle Fire’s attractive price point could potentially hurt Apple (NASDAQ:AAPL), but we do not think so. In another note we discuss that Amazon could actually be a threat to non-iPad players like Research in Motion’s (NASDAQ:RIMM), Motorola Mobility (NYSE:MMI) and other tablets based on Google (NASDAQ:GOOG) Android operating system.

The iPad accounts for around 12% of our $510 price estimate for Apple stock, which is about 25% above market price.

See our complete analysis for Apple stock here

Amazon does not directly compete with Apple

Kindle Fire is a 7-inch tablet, and we believe it poses design difficulties and is not as useful as a 10 inch tablet such as iPad. In our earlier note titled Do 7-Inch Tablets Stand a Chance?, we discussed in detail why Steve Jobs called the 7 inch tablet “Dead on Arrival”.

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. We agree with this view and believe that 7-inch tablets will find it difficult to make meaningful inroads vs. iPads.

Kindle Fire lacks certain features

Although Amazon can match Apple in terms of access to media content, Kindle Fire lacks certain features present in iPad such as forward- and rear-facing high-resolution cameras, microphone and a connection to a 3G wireless network. 3G tablets have started to become more popular. AT&T (NYSE:T) found that most customers that purchased 3G tablets also activated data plans, an item we discussed in iPad Average Price Could Increase as Telcos Sell More 3G Tablets). [2]

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Notes:
  1. Amazon Unveils $199 Kindle Fire Tablet, Bloomberg, September 29th, 2011 [↩]
  2. AT&T’s Lurie: Majority of Tablet Customers Activate 3G Connectivity, FierceWireless, September 13, 2011 [↩]