Speculation is rife that Amazon (NASDAQ:AMZN) could soon launch its own tablet [1] to rival Google’s (NASDAQ:GOOG) Android based tablets and Apple’s (NASDAQ:AAPL) iPad. Such a device will provide Amazon with a single platform to package its spate of recent product and service launches, such as the Android app store, Cloud Drive, Cloud Player, the Amazon music store, a new streaming movie and TV show service, Kindle, etc. We believe that this would be a good move for Amazon, and we believe the tablet will compete with Apple and Samsung (SEO:005930) while its online offerings already compete with Microsoft (NASDAQ:MSFT), Apple, Google and others.
We currently have a price estimate of $199 for Amazon’s stock, which is roughly in line with the market price.
Amazon Could Leverage its Lead in the e-Books Market
Amazon is the market leader in the e-Books market and claims its market share to be around 70%- 80%, according to an interview conducted by CNET with an Amazon Vice President. [2] Amazon’s edge lies in its inventory of e-Books and it has more than 710,000 e-Books [3] while Apple has far fewer e-Books in its iBookStore. Amazon has an app for the iPad to download e-Books from Amazon and read it on the iPad. Although it helps the company sell more e-Books, it also helps Apple. Hence, if Amazon introduces a tablet, it could leverage its lead in e-Books to sell more tablets and compete more directly with the iPad.
The company currently keeps the pricing of its e-Reader Kindle relatively low in order to avoid competing head on with the iPad. Users prefer the iPad because it not only acts as an e-reader, but it can also play videos, games and download apps. Hence, we expect iPad sales to exceed that of Kindle by a wide margin, in spite of the price difference.
Amazon Has Touch Screen Technology
Amazon acquired Touchco, a touch screen technology start-up early in 2010 to boost its touch-screen functionality for its e-reader Kindle. However, Amazon could leverage this technology for building tablets as well, as touch screen functionality is one of the most important functionality for a tablet.
An Amazon branded tablet would help popularize its other product & services, such as its app store, cloud drive service and cloud player app by having them installed on its tablet, which would help drive adoption. With a hit tablet, Amazon could better compete with Apple and Google in providing a suite of mobile devices, services and multimedia functionality.
See the complete $199 Trefis Price estimate for Amazon.
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