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Amazon's Tablet: Winners and Losers

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Rumors often aren't worth the pixels they're written on. But when a well-respected publication posts a hands-on preview of a long-rumored gadget, you sit up and take notice. It doesn't hurt if that outlet also has a track record of breaking news with some accuracy.

TechCrunch reported last week that the hotly anticipated tablet computer from (Nasdaq: AMZN  ) is indeed very real and probably heading out to manufacturing very soon.

Smaller than the Apple (Nasdaq: AAPL  ) iPad 2 and less powerful than the Motorola Mobility (NYSE: MMI  ) Xoom or Samsung Galaxy Tab, the Amazon Kindle tablet still packs a mean punch. You see, it's priced to move at $250 per unit. At that price, Amazon doesn't need a computing powerhouse.

In the eternal quest for balance between price and performance, Amazon is clearly leaning toward the low-cost side. The Xoom sports a dual-core NVIDIA (Nasdaq: NVDA  ) Tegra 2 monster of a processor; Amazon appears to be going for an unnamed single-core option. iPads and their would-be killers like to have a full 10-finger touchscreen controller from Atmel (Nasdaq: ATML  ) or Cypress Semiconductor (Nasdaq: CY  ) , but Amazon keeps it simple and cheap with last-generation two-finger sensors.

The list of compromises goes on and on. But in the end, this thing should cost about half of what Apple charges for an iPad, and the TechCrunch writer was suitably impressed by its functionality, design, and performance. The iPad finally has a challenger that matters.

That said, it's no iPad killer. In fact, Amazon isn't pointing this cannon at Cupertino or even at Mountain View. The real target lies some 15 minutes down the road, in Los Gatos.

That's right -- CEO Jeff Bezos just designed a powerful weapon for his media war against digital-video specialist Netflix (Nasdaq: NFLX  ) .

The hands-on walkthrough says that the tablet will ship with a free trial to Amazon Prime, the free shipping service that comes with a side of online movie rentals. Being the only American competitor in the same subscription space as Netflix, Amazon has always played catch-up. Like I said, this thing is priced to move and could become a big hit. Designed to tap into Amazon's ecosystem of media services, the Kindle tab could be the missing hardware piece of Amazon's digital-video puzzle.

This fight just got interesting.

Regardless of who wins the tablet wars or even the video-store battle, you can rest assured that fatter network pipes will be essential in the next era of home and mobile entertainment. Grab a free special report on that market, including an in-depth profile of perhaps the best investment you'll see all year. It's essential information for any serious tech investor and totally free -- why not grab your copy right now?

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, NVIDIA, Cypress Semiconductor, Netflix, and, writing puts in NVIDIA, creating a bull call spread position in Apple, and buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 (7) | Recommend This Article (9)

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 September 07, 2011, at 11:19 PM, megoogler wrote:

    Nook Color tablet/ereader from Barnes & Noble has been on the market for a year and sold millions of units at $250. Gives Flash, apps, videos, web, eBooks and magazines subscriptions with video inserts, and the best anti-glare coated screen on the market. Technology "leader" Amazon finally decided to catch up with the book store company.

    Kindle only supports eBooks in its proprietary AZW format. Nook, on the other hand, supports both DRM-protected and DRM-free ebooks in ePub format thus it supports ebooks from B&N store, from any other DRM-free source on the web, and from public libraries

  • Report this Comment On September 08, 2011, at 12:41 AM, ConstableOdo wrote:

    I swear that Wall Street favors Amazon way over Apple, but if Amazon gets a hearty pat on the back by Wall Street for selling some cheap tablet in mediocre numbers, then I know Wall Street is composed of a bunch of manipulating crooks who fabricate value of certain stocks because they've sunk a lot of money into that particular company.

    The Nook Color already does what the Amazon tablet will do and I don't see Barnes & Noble being congratulated for it. Jeff Bezos must be giving kickbacks to the crooks on WS that praise everything that Amazon does no matter how mundane it is. Screw those pin-striped crooks.

  • Report this Comment On September 08, 2011, at 8:58 AM, EGTalbot wrote:

    Like the previous commenters imply with their vitriol, it seems clear that the primary target of this tablet is the Nook color. Amazon has seen its ebook marketshare decline (it all depends on whose numbers you believe, but it couldn't help but decline) and the Nook Color is the single biggest threat. Although purists will rail about the differences between the two, they are very similar. I personally do care about DRM, but most people don't, as proven several years back when Itunes removed most DRM and the result was not a bang, not even a whimper, but little meaningful reaction at all.

    Unless some unexpected bug comes along, I would be shocked if the new tablet doesn't have massive sales. All it has to do is be roughly as good at basic functions as the Nook Color and it will sell to the same general market, which Amazon has a lot more customers in than B&N did.

    Of course Amazon is also thinking about other places the tablet will reach. Netflix is one secondary target. I'm sure they're thinking about Apple, too, but this tablet won't be much of a threat to Cupertino in and of itself. My take is that Amazon is trying to take over and expand the market that B&N first created and it seems likely they'll succeed.

    All that said, I wouldn't buy AMZN right now personally - too pricey even with the potential upside of the tablet.

  • Report this Comment On September 08, 2011, at 5:15 PM, brinkov wrote:

    It's interesting how much the Nook Color gets overlooked by wall street with regards to tablet news. The Nook Color owns 50% of the non-ipad tablet market. Priced at $250, 50% the cost of other android tablets, it *is* in fact an android tablet, it can be rooted and it operates as a regular android tablet with much the same specs as the amsung galaxy tab except minus the front and rear cameras, but at less than half the cost...

    Basically, the amazon tablet may be a move into the space that could affect apple, but keep in mind that really what we are seeing is Amazon playing catchup in tech as Barnes and Noble has one up'ed the Kindle and provided better readers that are challenging Amazon's dominance in the reader space.

    Amazon's tablet will go head to head with the B&N Nook Color, which will force competition... B&N has played smart thus far, made a good move to ebooks, which is a necessity... It's the best pure reader tablet out there in the market right now, but the move by Amazon will force them to maintain innovation in order to continue to grow their share of the market. The advantage Amazon has is their large library of content. I think however you might see Barnes & Noble surprising in its sales. With Borders out of the picture, they are the last large bookstore retailer out there, the advantage that Barnes and Noble has is what is what has been perceived as their weakness: they have bricks and mortar stores. When you bring a nook color to the stores, you are able to read books in store for free for 1 hour each day. The reader is also able to read other ebook files, whereas Amazon's kindle forces readers to buy from Amazon. The Nook also allows lending through social features and borrowing ebooks from the library, something the Kindle has yet to adopt.

  • Report this Comment On September 09, 2011, at 9:49 AM, TMFZahrim wrote:

    To everyone noting that a rooted Nook Color becomes a full-fledged Android tablet:most users don't know what rooting is, that it can be done to the Nook Color, or what the benefits of doing this might be. Unless B&N installs a full-fledged Android environment by default, 99% of those potentially impressive little tablets remain simple ebook readers with a browser, nothing more.

    So until further notice, Nook Color is not a competitor to iPads, Xooms, or any other kind of real tablet.

    Anders (whose Android phone is rooted and runs CyanogenMod, thank you very much)

  • Report this Comment On September 11, 2011, at 12:24 PM, brinkov wrote:

    The nook environment is controlled by barnes and noble but it is actually running of android... It's actually quite a bit more than a reader with a browser, it has an app store, games, music player, email, etc. Plays movies... Browser has flash... Games... Angry birds etc.

    It actually is an android tablet disguised as a e reader... And they are basically primed to expand content sales to music and movies IMHO...

    The nook color actually is a very important competitor in the tablet space because for the average consumer, the nook color does everything they would really use a tablet for... I actually think Amazons move into the tablet space is more a response to the nook stealing market share from the kindle rather than an attempt to go at the iPad...

    Although an interesting rumor is that apple might also be launching a 7" tablet.

    Rumor has it Barnes and Noble may be launching the nook color 2 this month, before the Kindle tablet hits the market... L

  • Report this Comment On September 11, 2011, at 1:11 PM, brinkov wrote:

    I think what has me interested in th potential of the nook is, it's a readers tablet but has localized in store features like being able to through the wifi read any book for free an hour each day... You can then continue from the place in the book you were at the day before... I think if Barnes and Noble plays up their bricks and mortar stores and distribution across cities, they can actually do some interesting unique things amazon cannot... Like integrate social features with in store events, etc... Take advantage of their store network to offer support, the way the apple store does, etc. I think when it comes to books, people still want to browse a bricks and mortar store rather than all online... Unless Barnes and Noble wants to go the way of Borders, they should play to the ebook and integrate nook features with the store IMHO.... That's their unique advantage over other e readers like kindle and kobo, etc.

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