Bet Big Against the iPad

Is Apple (Nasdaq: AAPL  ) about to get cored?

Yesterday, I made the case for why Amazon.com (Nasdaq: AMZN  ) poses a credible threat to Apple and its empire -- if only it can avoid the mistakes that Hewlett-Packard (NYSE: HPQ  ) made with the TouchPad. While some Fools have expressed skepticism regarding Amazon's commitment to building a tablet PC, and taking on the Cupertino Colossus ... Amazon seems pretty darn sure of itself.

Amazon's initial move against its rival is expected to come in October, and to take the form of a seven-inch tablet built on contract by Taiwan's Quanta Computer. Already, however, Amazon is planning ahead to ramp up, and launch a full-blown 10.1-inch tablet that will eclipse the iPad -- sizewise at least -- in 2012. Amazon's also apparently enlisting an ally in this battle (or turncoat, depending on your perspective). According to tech sleuth Digitimes, Foxconn Electronics will be tapped to build the 10-inch tablet. As Foxconn is already the builder for both Apple's well-received iPad and Amazon's even more popular Kindle, this could spell trouble for Apple. Foxconn has the chops to make this product a success.

A comp too far?
Granted, some pundits are already criticizing Amazon's move, saying that it could undermine sales of its seven-inch tablet if consumers decide to hold off and buy the bigger version. Already, though, I've begun speaking with potential buyers eager to see the new product, who say they'd actually prefer the smaller, more portable tablet. Then, if Amazon finds a way to offer better daylight visibility, they'll jump on it.

More strategically, I also think Amazon's right to make its commitment to tablet production clear. In beginning plans for mass production of a larger tablet before the first generation has even seen the light of day, Amazon is throwing down a gauntlet. It's telling potential customers and app developers, "Hey, we're not going to pull an HP and run away from Apple, tails tucked. And we're not going to accept a drubbing like Dell (Nasdaq: DELL  ) and Research In Motion (Nasdaq: RIMM  ) , either." Amazon's telling us that even if sales don't take off immediately, it's in this for the long haul, and will do what it takes to get up to scale on this product -- and knock King Apple right off his LCD throne.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 440 out of more than 180,000 members.

The Motley Fool owns shares of Apple and Research In Motion. Motley Fool newsletter services have recommended buying shares of Dell, Amazon.com, and Apple, as well as creating a bull call spread position in Apple. 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.


Read/Post Comments (16) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On September 01, 2011, at 5:41 PM, makelvin wrote:

    Personally, I am very interested to see if Amazon's new Android tablet will allow Barnes & Noble's Nook app be on their tablet and that the Nook app will be allowed to ebook purchases directly without going through any Amazon's in-app purchase. If Amazon allow that to happen, then we know this Android tablet is truly open; otherwise, it will just be another iPad wannabe.

  • Report this Comment On September 01, 2011, at 5:52 PM, Superstef wrote:

    What a fanciful article. Another in the long line of claims that some as yet-unknown tablet coming some time in 2012 will knock the market leader off its perch, without, of course, providing a scrap of evidence. It's another punt, too, for why a 7 inch tablet is preferable to a 10 inch tablet, when all the actual evidence from the market shows this not be the case.

    The focus on the product in the user's hand (the tablet) misses entirely the point that the iPad (at least) is more than this: it's an entire eco-system of which the physical device is surely a vital part, but far from being the exclusive reason for it being so popular. The idea that an online retailer could somehow put together and sustain a high tech eco-system to knock out the iPad eco-system, when a true high tech company with massive technical resources, such as HP found it impossible, is making a number of assumptions about how hard technology actually is to achieve.

  • Report this Comment On September 01, 2011, at 6:04 PM, realMikecart1 wrote:

    <...and Amazon's even more popular Kindle.>

    If you have any kind of numbers to back that statement up, then perhaps the rest of the article might have some credibility.

    Can you provide us some proof for that statement?

    Thompson

  • Report this Comment On September 01, 2011, at 6:06 PM, chip825 wrote:

    In the last week, a number of so called analyst's have been hyping the Amazon tablet. (Yet to be seen by anyone).

    Has anyone really paid attention to what has happened to every competitor to the Ipad/Ipad 2?

    This is a sure sign of desperation by Amazon. I'm thinking is headed for the dump heap by year end. Sure, come out with a tablet and sell it at a loss to compete. Great Business model.

  • Report this Comment On September 01, 2011, at 6:23 PM, PolkNole wrote:

    This article is lame. I've read this virtually identical article every time a new tablet is emerging.

  • Report this Comment On September 01, 2011, at 6:54 PM, georgeandpatkru wrote:

    Why are you bashing i Pad, It's a great product. Why is it so important to pit one company against another. If amazon makes a better product for less money the market will respond accordingly. Why waist everyones time guessing what might happen. Most Fool's articles are more informative than this one. Disappointed!

  • Report this Comment On September 01, 2011, at 7:00 PM, aagramonte wrote:

    People said Android was dead when it did not sell well at first on SmartPhones - look at ti now. All it needed was one company to do it right and it took off - same thing will happen to Tablets

    As for the 7 vs 10 inch - having a choice is not a bad thing!

    I have a 7inch Galaxy Tab - I wanted something small for the train ride to work - I did not care that Samsung has a 10 inch or Apple a 9inch. Those were to big when I saw them at the store.

  • Report this Comment On September 01, 2011, at 8:54 PM, mk96804 wrote:

    I am pleased that Amazon is taking the next step. Competition is always good and I hope that their product will blow us all away. In the end, we as consumers will win.

    Apple's strength is creating products where hardware and software mesh; they just work well together. In recent years they have successfully identified and created markets that no one else was able to capitalize. How many expert naysayers said that silly named iPad was nice but had no real world use.

    The iPad is 2 years old and their competitors are just catching up. I am looking forward to Apple producing the next best thing while their competitors continue trying to improve on the last best thing.

  • Report this Comment On September 01, 2011, at 11:56 PM, peto3 wrote:

    Rich, bet big against the iPad and you'll find yourself very, very poor ...

  • Report this Comment On September 02, 2011, at 1:44 AM, rlcato wrote:

    I think it will have a shot at 2nd best -ahead of Samsung. Amazon has a credible site and could make it's appstore more meaningful: relate to Androids. It will make their appstore an app in the machine and probably make it a $.99 stand-alone app. If it does well next summer, it will start pulling more Android-eyes to that eco-sysytem. Really, what does Google have in a way of a market? Or Samsung? Or Asus? etc. Or any of those no-names that are on the market. It could be like the iPod for Android.

    Right now Amazon will have to get this tablet out from now to just a couple of weeks after CES 2012 and before Apple's event for otherwise, we'll be looking at a summer release. Look what happened during CES 2010. Many companies delayed, bailed or failed in releasing.

    Being the 2nd best isn't bad; no matter how distant. Samsung does not have a vice-like grip to it. They're loosing out to HP… for now.

  • Report this Comment On September 02, 2011, at 3:02 AM, iParadigm2watch wrote:

    Oh, spare me with Amazon prognostication..

    Jeff Bazos never did anything innovative or original other than the idea to sell books on line.....all the rest is copy..copy..copy..

    Ever try to get a refund? I have a friend who has been waiting for months for one!...

    Amazon. eBay, Facebook, Netflix.....none of these companies will be around in 10 years....good riddance I say.....not needed now, not needed at all!

    Better, small independent retailers are coming on line......democratization of retail!

  • Report this Comment On September 02, 2011, at 6:41 AM, candrsn wrote:

    The iPad market is too similar to the iPod market to be a mere coincidence. Why didn't Amazon try and take on Apple in the mp3 market? Oh wait, they ignored that market segment......

    The iPad market is essentially the iPod market all over again. Amazon has had mp3 downloads available since at least 2002 or 2003, even before Apple introduced iTunes. Amazon had no clue and still has no clue.

    As for the Kindle success: Yes, this ereader was successful, but that's ONLY because it was the first to enter the market. Apple's iPod and iPad were the first as well, but Apple had the hardware andy software expertise and 'creative touch' to have confidence in their designs and release them in truly large volumes. Amazon may attempt the latter, but that does not guarantee success; and, remember, Apple does still control the supply chain advantage-wise - if Samsung and HTC were not able to really crack the supply chain code, then how will Amazon?

    Tim Cook has much more experience than any one in Amazon or at Quanta.

    AAmazon has outsourced (90% of the work, let's say) to a low-cost, lacking in innovation Taiwanese company. This is not to say that Taiwanese engineers are incompetent (I work with close to 50 of them), but they do not possess the creative impulse of the army of engineers Apple employs in Cupertino. The point here is simply that a no-name like Quanta Computers cannot engineer an iPad-like device in basically a span of months that will be truly pleasing to customers. If it does please the customer (and let's take Samsung and HTC as example), it will only because they infringe on Apple's IP. Furthermore, Amazon has to wrestle with whether or not to keep media content options open or make it closed as in Apple's case. I see that as a problem.

    Barnes and Noble is certainly aware of Amazon and they already have the Nook Color in place. Amazon will be following Barnes and Noble (to actually 'downgrade' what I had mentioned yesterday).

    Amazon - not a chance that they will match Steve Job's, Time Cook's, and the entire Apple team's brilliance.

  • Report this Comment On September 02, 2011, at 6:56 AM, candrsn wrote:

    Oh, and one more thing: Amazon's supposed 'quad-core' tablet mention will not matter. For one, the technology to control power and thermal transfer in a tablet device sporting a quad-core has not been well-tested (basically, Apple has not perfected it for everyone else). Even more than that, though, specifications on these devices are VERY misleading.

    You should be looking at how Apple runs its design efforts versus what some no-name in Taiwan is likely doing. Apple, in short, manages its device cost by getting the most it can out of slightly lower-spec'd memory and processors by truly optimizing those designs. Apple bought PA-Semi to design processors in-house but also to make sure that they could optimize on the process design, instead of depending on an outside firm to provide something 'off-the-shelf'. I think iOS actually includes processor-specific 'hooks' and software-defined hardware to optimize how well iOS runs (only a guess here). You cannot under-estimate (especially of you are not a hardware expert) Apple's designs and the role they take in shaping this market. Just a warning (that has already proven itself time and time again, dating back to 2001 in the iPod line!)

  • Report this Comment On September 02, 2011, at 10:07 AM, lucasmonger wrote:

    Here's the thing... if Amazon creates a tablet similar to the Moto Xoom and Samsung Galaxy tablet with little other software differentiation from the standard Android tablet, then it will fail. But. if Amazon adds their own differentiation (Amazon store fully integrated into the tablet - not just an App or accessible from the browser, Amazon video player and book reader as an integral part of their ecosystem, and Amazon cloud services thrown into the mix) then there will be a huge ecosystem battle between Apple's iCloud/iTunes and Amazon's Kindle/Store. I like the Amazon Store on the iPad, but it has some limitations compared to the website. If the entire Amazon Store offerings become a central focuses (focii?) of their tablet to harness everyone's shopping needs, it might give Apple a run for their money. The Apple store only sells their devices and accessories, but not much of anything else. I can imagine a day where every room in my house has a tablet on the wall that not only serves as a light switch connected to a home automation system, but also becomes an easy way to replace supplies (tissue, toilet paper, toothpaste, mouthwash, groceries) as we run out.

  • Report this Comment On September 06, 2011, at 10:15 AM, TMFDitty wrote:

    @lucasmonger: "Like."

  • Report this Comment On September 06, 2011, at 10:41 AM, TMFBiggles wrote:

    TechCrunch is all over this:

    http://techcrunch.com/2011/09/02/amazon-kindle-tablet/

    Looks like lucasmonger's call is about on point.

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