This Is the Only Real iPad Challenger

We've been through Xooms, Galaxy Tabs, and PlayBooks. The hype comes. The "iPad killer" tag gets bandied about. The hype moves on to the next big name entrant.

Is that a TouchPad I see?

Well, no one is coming anywhere close to Apple (Nasdaq: AAPL  ) and its iPad.

However, just because everybody has failed to make a dent in the tablet market doesn't mean Apple will corner this booming niche forever.

A legitimate threat is drawing closer, and things are about to get interesting.

A tablet by any other name
Kintab? Tabdle? We still don't have a name of Amazon.com's (Nasdaq: AMZN  ) inevitable tablet, but we know it's coming.

"Stay tuned," CEO Jeff Bezos hinted in May, and now chip analysts that have a pulse on component makers see the framework of an Amazon tablet inching its way toward production.

Canaccord Genuity analyst Bobby Burleson provided some color yesterday, passing on news that Amazon plans to build more than 1.5 million tablets this quarter, with as many as 5 million rolling off the assembly line by the end of the year.

Obviously there's a big difference between shipping out tablets and actually selling them. Just because Amazon makes 5 million of its rumored 10-inch tablets doesn't mean that it will be able to find 5 million interested buyers. However, can you picture any tech giants with tablets on the market eyeing that big an order for an unproven gadget?

Amazon can do it. Perhaps more importantly, Amazon can sell each and every one of those tablets.

What does Amazon have that Motorola Mobility (NYSE: MMI  ) , Samsung, Research In Motion (Nasdaq: RIMM  ) , and Hewlett-Packard (NYSE: HPQ  ) do not? After all, these are companies that have years -- and in some cases, decades -- of experience building popular consumer electronics.

Isn't Amazon just an online retailer? Well, that's pretty much it. Amazon has the direct consumer reach that the hardware behemoths lack. It also knows how to work a hammer.

The market wasn't ready to give up books when Amazon introduced the Kindle in 2007. That didn't stop Amazon from hammering it home, featuring the Kindle prominently on its landing page, until skeptical bibliophiles became Kindle cradlers.  

Redefining the tablet market
Nobody needs a tablet. Those who want a tablet, in reality, desire an iPad. The mystique behind Apple's app ecosystem has carved out a market that is unique to the class act of Cupertino.

Apple doesn't want you to know the truth. It doesn't want you to realize that Steve Jobs' "magical" toy is really just a Margaritaville frozen drink maker. It's a novelty at first, but then it becomes something that you just whip out when guests come over.

Amazon is the company that can change that, just as it legitimized the e-reader market.

The inevitable tablet will obviously read digital books and stream digital music -- just like your iPad. However, it will also be a device to serve unlimited video streams to Amazon Prime subscribers at no additional cost. Can your tablet do that? Amazon will broker the deals with the content mavens that most tablet makers wouldn't dream approaching because it's already doing business with them through the country's largest online storefront.

Just wait until the holidays come around. A visit to Amazon.com to buy something else entirely will become an education on why you finally want -- and perhaps even need -- a tablet.

Take two tablets and call me in the morning
Amazon won't be the only winner here.

Burleson's report waxes favorably on NVIDIA (Nasdaq: NVDA  ) and Atmel (Nasdaq: ATML  ) , as he's hearing that Nvidia's Tegra chip and Atmel's maXTouch touchscreen controller will be part of Amazon's device. These may both be multi-billion-dollar companies, but playing a key role in what will easily be the market's second most popular tablet by year's end is a needle-moving event.

How far the gap will be between Apple and Amazon in the tablet realm really rests on Amazon at this point. Will it price it competitively? Will it find partners that can subsidize a chunk of the hardware? Will it market it as aggressively as it did the Kindle? Will it succeed in finally getting the country to realize why it needs a tablet in its living room and in its backpack?

The audience is waiting, Amazon. Let's get this show started.

Will you be buying an Amazon tablet? What would you convince you one way or the other? Share your thoughts in the comment box below.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and NVIDIA. Motley Fool newsletter services have recommended creating a bull call spread position in Apple and writing puts in NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz is starting to see more Apple products creep into his home lately. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 07, 2011, at 3:38 PM, mexborder wrote:

    es I would bu an Amazon tablet-I have a Droid x I and am around Apple people whom I find irritating, clueless wanna be Geekheads--Steve Jobs acts same----at least he has something to back his attitude,<somewhat>

    GOOOO Amazon--Jeff the little weasel is gonna do it again-

  • Report this Comment On July 07, 2011, at 3:38 PM, bugnuts wrote:

    Yes, Amazon can sell. Good thing they also accept returns.

    Trying to compete with the iPad is a tall, tall order for a company with no experience designing and building computers, much less the eco system to support them.

  • Report this Comment On July 07, 2011, at 4:14 PM, DeadaimSr wrote:

    Go NVDA!!!!!!!!!!!!!!!!

  • Report this Comment On July 07, 2011, at 4:36 PM, David369 wrote:

    Like a western shoot out, this should be fun to watch.

  • Report this Comment On July 07, 2011, at 4:46 PM, mip451 wrote:

    Ya, just like they did with the iPod.

  • Report this Comment On July 07, 2011, at 6:41 PM, jbelkin wrote:

    Amazon so far has been incapable of designing a professional OS - not as easy as it sounds - after 4 years at it, no one thinks android is even remotely in the same league as Apple. Android sells when the device is subsidized for free or $.01 but ask people to pay $299 to $799 for an android OS device - very few takers. Kindle worked reasonably well when the competition was Sony & a few others but now has fallen behind the Nook. the first Kindle had the page turn and on-off switch located next to each other and why exactly does an ereader need 1/4 of its space devoted to a keypad? Amazon is a GREAT, GREAT retailer but as CE manufacturer, me'h. They do not have the company culture. If they keep the price below $199 and color, they will sell enough, at $249 - reasonably successful but no more than 10% of ipad sales. anything above that, people will say - for $150 I can buy an ipad that does EVERYTHING stte of the art (including being a state ofthe art ereader). Thta is why the Nook is smart - stay away from the ipad in pricing, keep the weight down and sell to heavy readers who want to read 200 books a year BUT want to keep it simple and not deal with other stuff.

    But also keep in mind the icloud launch will be a HUGE BOOST to this crowd as it simplies EVERYTHING. The iCloud offers the simplest equation - NEVER LOSE A BOOK. Along with music, apps, docs, etc ... so now the question will be - what is that value proposition? While BN & Amazon in effect can offer the same equation (never lose your book order portion) but since they can't really match the conveneince of the rest of icloud, how much purchasing power does that take away from Nook & Kindle for the "upper levels." $199 - no prob - above? Too close to the ipad? That is the power of Apple ... to suck up the margins.

  • Report this Comment On July 07, 2011, at 7:25 PM, hem666 wrote:

    Why does everybody ignore the fact that the long term market for this type of product is going to focused on one thing and one thing only! As soon as the market place seriously realises that most of these devices are flawed - SECURITY - IMO Its lame on every device bar RIMM's playbook.

    Of course it would be awesome if Rim realised this too, and subsequently actually pull their fingers out and re-release its offering, with some other very important issues resolved. Upon realisation of this it will be a market changer!

  • Report this Comment On July 07, 2011, at 8:32 PM, murthg1 wrote:

    My Xoom with the NVDA chip is unbelievably fast and way more awesome than Ipad...

  • Report this Comment On July 08, 2011, at 5:10 AM, EvenSteppinWolf wrote:

    "It's a novelty at first, but then it becomes something that you just whip out when guests come over."

    love this comment in your article! thanks for that!

    when i read it, i knew you were a poser/idiot.

    please tell me they don't pay or feed you for your 'contributions'. i'm in amzn's home town, so i love it when buffoons like you champion it.

    one stat: 3% gross margins. one more: 90 days payables. yeah, that's gonna work in the long run.

    oh, and one ticker symbol that'll benefit from the coming nat'l v.a.t. AND mandated 50 state collected retail sales tax: WMT

  • Report this Comment On July 08, 2011, at 9:21 AM, samkass wrote:

    Yes, iPads can get free video from many sources. I see a zillion of them every day commuting to NYC. Amazon will be just another contender, albeit one with a better ecosystem than most of the rest. But we'll have to see what their API, OS, and product story looks like.

    And as for folks talking about their Xoom's CPU, they completely miss the point for two reasons: 1. CPU speed has almost no effect on the device's usefulness, and 2. the one area where it does have an effect-- games-- the Xoom is much slower than the iPad because of its slower GPU.

  • Report this Comment On July 08, 2011, at 11:33 PM, Popnfresh100 wrote:

    Would a successful Android tablet help Amazon or hurt them?

    Epub continues to grow by leaps and bounds as the standard for ebooks; Amazon seriously needs to counter this issue. They can either fully embrace the new standard - ensuring that their products remain relevant but sacrificing the opportunity to lock-in the market; or they can fight it and risk becoming totally irrelevant as an e-book service.

    An Amazon tablet will only make the problem hairier. There are already epub reading apps in the Amazon app store- aldiko and kobo. If the Android Kindle app DOESN'T get updated to read epub, they will most likely become the number 2 reading app in their OWN app shop (presumably, an Amazon tablet would read Kindle books without the need for an app download). Not only will this further cement epub as the standard- it will also force Kindle to compete on-device with epub versions, which users may prefer.

    This is not a problem- if Amazon can make money on either the Kindle hardware.

    But Barnes and Noble- now backed by Malone's cash- won't let them do that!!! I wouldn't be surprised if Riggio - now operating without any direct shareholder accountability- doesn't start giving Nook Colors away for free.

    Operating as a subsidiary, Barnes and Noble doesn't need to worry about being profitable or even staying solvent- their job is just to beat Amazon into submission for the benefit of Malone and Riggio's other businesses (Live Nation, Gamestop and Sirius, etc.).

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