Amazon’s Kindle Fire Could Make Microsoft’s Tablet Entry Even More Difficult
Microsoft (NASDAQ:MSFT) recently released the Developer Preview of Windows 8, the latest version of its Windows OS. The other major players in the tablet market are Google’s (NASDAQ:GOOG) Android and Apple’s (NASDAQ:AAPL) iOS. However, Apple’s iPad clearly dominates the tablet market and Google hasn’t been able to capture significant market share because Android OS on tablets hasn’t yet matured as a platform and has only a fraction of the total tablet apps that iOS does. HP (NYSE:HPQ) recently announced that it wouldn’t go forward with webOS development and the TouchPad, and RIM’s Playbook is in dire straits.
Which is why, if Microsoft moves quickly with the Windows 8 launch, it stands to capture a significant share of the still nascent tablet market which is growing at a very fast pace. However, there may be one major impediment to Microsoft’s plans – Amazon’s (NASDAQ:AMZN) Kindle Fire which is being announced today.
We currently have a $28 Trefis price estimate for Microsoft, which implies a 10% upside to the current market price. Windows OS is one of Microsoft’s largest businesses, contributing nearly 25% to its Trefis price estimate.
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How Amazon’s New Tablet Could Disrupt Microsoft’s Tablet Plans
Android hasn’t been able to crack the tablet market precisely because most Android tablets are priced much higher than the iPad and offers less in terms of user experience and an app library. As the success of the Barnes & Noble Nook proved, there is a huge market for a $250 Android tablet even if it may not be as good as the iPad.
Amazon’s new Android tablet will be reportedly priced at $199, which is less than half the price of the iPad. Amazon may bundle it with the Amazon Prime service, which makes it an even better purchase.
It will sport some really good hardware, much better than the first generation of tablets. Despite this, Amazon will be able to price its Android “Kindle Fire” tablet at a very low price point and perhaps sell them at a loss because it expects to make money not by selling tablets, but by selling content on those tablets. It did it once with the Kindle, and it is very well positioned to do it again.
In comparison, Microsoft’s tablets are expected to be priced higher than the iPad, thanks to the more expensive hardware and Microsoft’s Windows 8 license fee of around $50 for tablets. Besides, Windows 8 will be launched around the end of 2012 giving Amazon more than a year to capture the low end of the market and possibly even the high end with the rumored second Android tablet, which will compete in the premium segment with other Android tablets, the iPad and Windows 8 tablets.
The Amazon Android tablet could be the biggest threat to Microsoft’s tablet plans.
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