Amazon Readies for Tablet Battle with Viacom Deal and Price Cuts

Amazon (NASDAQ:AMZN) continues to aggressively build up scale with the two new announcements it made last week. The company has entered into another major content licensing agreement with Viacom to add to its Prime Instant video service, ^[1] and has also announced a price cut for its cloud service Amazon S3. ^[2] This prompts the big question – will Amazon give margins its due importance in 2012 and will it able to curb operating costs? We think the company may continue with its expansion efforts to extract most out of the Kindle Fire. Amazon competes in the e-commerce and e-content space with companies like eBay (NASDAQ:EBAY) and Apple (NASDAQ:AAPL).

See our full analysis for Amazon’s stock here

More Goodies for Kindle Fire Users

Reigning in as Amazon’s top-selling product in the U.S. for 11 straight weeks, ^[3] the Kindle Fire is undoubtedly expected to be the company’s biggest bet this year to improve revenues.

The agreement with Viacom expands Amazon’s e-content arsenal with the addition of TV shows from popular channels like MTV, Comedy Central and Nickelodeon. In addition to significantly diversifying the content offerings, this deal brings the total number of videos in Prime Instant to 15,000. It seems like Amazon wants to be well-prepared for another possible bumper pre-order season for the next version of the Kindle Fire.

We have a revised price estimate of $205 for Amazon’s stock, which is roughly 10% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Amazon Announces Increased Prime Instant Video Selection for Kindle Fire and Prime Customers via Digital Video License Agreement with Viacom, Amazon Press Releases, 8th Feb 2012 [↩]
2. Amazon.com Lures Businesses to the Cloud With Rate Cut, Wall Street Journal, 7th Feb 2012 [↩]
3. Kindle Fire named ‘most successful’ Amazon product, Digital Spy, 16th Dec 2011 [↩]