If Apple Wasn’t Scared of Amazon Before, It Had Better Be Now

Wow.

That’s all I can say after Amazon.com’s (Nasdaq: AMZN  ) announcements earlier today. We knew the e-tailer was set to unveil upgraded Kindle Fire tablets today, but we weren’t exactly sure how many, or other pertinent details. Of all the major tech events this month hoping to steal attention from Apple’s (Nasdaq: AAPL  ) iPhone unveiling, this one is now the top contender.

“People don’t want gadgets anymore. Check out our new gadgets!”
Jeff Bezos took the stage, and started off the presentation by pointing out how no one buys other Google (Nasdaq: GOOG  ) Android tablets, even though over two dozen were launched last year. He attributed this to the notion that consumers don’t want gadgets anymore. No, instead they want services, ones that improve over time, in an unsubtle nod to Amazon Prime. "Kindle Fire is a service," he added.

In a sense, this aptly sums up competition among Android tablets over the past year in one succinct sentence. Other Android tablets had beefier specs, but less compelling content offerings. The first Kindle Fire was absolutely lackluster in just about every hardware spec imaginable, but was backed by Amazon’s wide plethora of content services, and proceeded to outsell them by a large margin. That shows just how important the service component really is.

Ironically, after saying people don’t want gadgets anymore, Bezos went on to unveil a whole slew of … gadgets.

"Hardware is a critical part of the service."
Of course, you need a physical manifestation to serve as a content portal, with Bezos acknowledging that "hardware is a critical part of the service."

First up was the new Kindle Paperwhite, which features a subtle backlight, and improved resolution, so you can read in low-light environments. It’s an obvious response to Barnes & Noble’s Nook Simple Touch with GlowLight and, in characteristic Amazon fashion, undercuts the rival device by $20. Adding 3G will cost an extra $60. The regular Kindle got some incremental bumps and a $10 price haircut, to just $69.

But no one was there for the regular Kindles, were they? No, the main flame was the Kindle Fires.

The main flame
The current Kindle Fire got a minor bump, vaguely claiming that it sports a faster processor, double the RAM, and 40% faster performance. It also received a price drop to $159. The new models are called the Kindle Fire HD, and they come in both 7-inch and 8.9-inch sizes. Both feature, you guessed it, HD resolutions and other improvements.


 

Kindle Fire HD 8.9”. Source: Amazon.

Surprisingly, Amazon did not opt to go with a quad-core NVIDIA (Nasdaq: NVDA  ) Tegra 3, as most had suspected and, also, as Google went with in the Nexus 7. Instead, the company again tapped Texas Instruments (Nasdaq: TXN  ) , featuring an OMAP 4 chip inside. It’s an OMAP 4470, a similar but upgraded processor compared to the OMAP 4430 used in the first Kindle Fire. Bezos even touted some benchmark stats showing that the OMAP outperforming the Tegra 3.

The new tablets also gets dual stereo speakers, and Bezos took a direct shot at the iPad by saying the "standard today" is one speaker with mono sound, while displaying a picture of an iPad. The 8.9-inch model is clearly aimed at the iPad, and the 7-inch flavor has the Nexus 7 in its sights. Here’s how the new models stack up.
 

Specification Kindle Fire HD 7” Nexus 7 Kindle Fire HD 8.9” iPad 3
Screen size 7-inch 7-inch 8.9-inch 9.7-inch
Resolution 1280 x 800 1280 x 800 1920 x 1200 2048 x 1536
Pixel density 216 ppi 216 ppi 254 ppi 264 ppi
Processor TI OMAP 4 NVIDIA Tegra 3 TI OMAP 4 Apple A5X
Storage 16 GB / 32 GB 8 GB / 16 GB 16 GB / 32 GB 16 GB / 32 GB / 64 GB
Price $199 / $249 $199 / $249 $299 / $369 $499 / $599 / $699
Sources: Amazon, Google, Apple.

Strictly on the hardware front, Amazon now has the Nexus 7 beat by offering greater storage at the same price points. Just when the Nexus 7 was starting to gain traction, Amazon’s provides a strong response.

But wait! There’s more! Amazon is turning up the heat with 4G LTE, also. This surprised me, because most tablet makers have been averse to working with carriers wherever possible; but Amazon is offering aggressive data plans through AT&T. It was somehow able to finagle massively discounted service plans, albeit with a very limited data allowance. You can get 250 MB per month for 12 months for a one-time payment of $50.
 

Specification Kindle Fire HD 8.9” 4G LTE iPad 3 4G LTE
Storage 32 GB / 64 GB 16 GB / 32 GB / 64 GB
Price $499 / $599 $629 / $729 / $829
Monthly data allowance 250 MB 250 MB / 3 GB / 5 GB
Annual data service cost $50 $180 / $360 / $600
Sources: Amazon, Apple. Data prices shown are for AT&T’s network and assume data is purchased for 12 months.

The device itself costs more with LTE support, but still remains cheaper than the iPad. The 250 MB limit may suffice for casual consumers who travel infrequently, but data-hungry road warriors would most definitely need more.

iScared?
This is a major assault on both Google and Apple, as Amazon is aggressively targeting nearly all price points, ranging from $159 to $699, with everything covered in between. It’s offering a compelling value proposition, bundled into its service and ecosystem offerings. As the dominant incumbent, Apple has the most to lose if Amazon succeeds.

If Apple wasn’t scared of Amazon yet, it better be now.

Amazon’s penchant for disruption is why it’s a Fool favorite and longtime recommendation. We’ve also just released a ticker-specific report that outlines everything about Amazon investors should know. Grab it now, and get free updates included.

Fool contributor Evan Niu owns shares of AT&T and Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Amazon.com and Apple. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, Apple, and NVIDIA. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on Barnes & Noble. Motley Fool newsletter services have recommended writing puts on NVIDIA. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (12) | Recommend This Article (35)

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 06, 2012, at 8:36 PM, lrd555 wrote:

    Well, if Amazon investors are ok with a $400 million loss next quarter than more power to them. You see, a see the losses growing. How that's a good thing? I don't know.

    Heck, let's give old Kindles away for free. What's a billion dollar loss to Amazon investors now.

  • Report this Comment On September 06, 2012, at 10:54 PM, RandomMeaning wrote:

    Full credit to Amazon for being aggressive on price. Not sure that it really makes much business sense but Amazon is used to super low margins.

    In regards to Apple, I think of it this way: you buy Kindles for acquaintances and iPads for yourself (and close friends and family if you've got the buying power).

    This could put some pricing pressure on Apple but I think the main victims are Windows and Android Tabs. We'll see how they respond but for buyers going on the cheap, it's hard to beat Amazon.

    And to head off the expected "but Windows will have Office". Great. So does just about every desktop, laptop, and netbook on the planet. Hurray. You can buy yet another iteration of the same program to use on the smallest possible screen with a cramped keyboard. Yippee. Don't get me wrong, I'm sure some IT depts will go crazy for it. It just won't be useful for the poor shclubs stuck with it.

  • Report this Comment On September 07, 2012, at 8:34 AM, Mathman6577 wrote:

    It remains to be proven whether the Fire is really superior to the iPad.

    Hardware is not the only thing. Software and apps are just as important. Are Android apps better than iOS? Not yet. And there are not as many choices either.

    Putting up a few tech specs like screen size, resolution, etc. doesn't really mean anything. People do not buy tablets or smartphones, etc. based upon that stuff. They buy them because they work. The iPad works. People like it. Apple makes a good product.

    Also, I think using the $50 per year LTE cost for the Kindle with a limited amount of data (250MB is nothing really --- most people use about 1 or 2 GB -- is a little misleading. Most devices do not use LTE yet. A better comparison would be 3G.

  • Report this Comment On September 07, 2012, at 9:01 AM, hiddenflem wrote:

    the data plan is cheap because the carriers know that the ignorant people who buy the kindle are going to fall for such a plan and will then exceed the threshold. It is deceptive to compare their plan with the ipad on cost since they are not equivalent services... What are the penalties for exceeding 250MB? Plus their competition going forward at the low end is Virgin wireless, who is offering fixed monthly fees without subscriptions....

  • Report this Comment On September 07, 2012, at 9:08 AM, actuary99 wrote:

    250 MB / month? That would mean you never stream movies or don't use internet radio that frequently. In which case, what exactly do you use your tablet for, other than reading? In which case, why would you have any reading to upgrade from your current device or go with a cheaper model? The 250MB / month is virtually worthless, which is why it's only $50/year.

    I'm not a huge fan of Apple products, but I don't see this putting any dent in iPad sales. Apple buyers have always been willing to overpay for what they perceive to be a superior product. I don't see how Kindle Fire is a superior product, it just costs less.

  • Report this Comment On September 07, 2012, at 9:15 AM, JimmyZangwow wrote:

    lrd 555: What does "You see, a see the losses growing." even mean?

    Investors are typically fine with companies that demonstrate long-term profitability. For those of a more short-term mindset, investing can be trying. People have questioned Amazon's strategies for over a decade and a half, so it's nothing new for people to gasp about what happens short-term.

    But man, for anybody who is a) careful with their money and b) appreciates value, this new Fire looks like a great choice.

    One thing that bugs me is how Amazon is starting to follow the Apple playbook. The old Fire is what, 9 months old? I always liked that Amazon emphasized providing great selection of content over the devices over rolling out another half-a-thousand dollar gadget like clockwork. Now it looks like Bezos is channeling Jobs, who mocked the buyer 6-12 months after the previous device's introduction. That always rubbed me the wrong way, and I think (in spite of how it is perceived short-term) that no company can sustain that strategy; over time, the rollouts will become banal. That's fancy talk for "boring".

  • Report this Comment On September 07, 2012, at 10:18 AM, Risky88 wrote:

    Its obvious why amazon would take a loss!

    If someone told me

    give me a thousand dollars today and you could make 10,000 next year. Chances are you would take that bet if you thought it was pretty safe.

    Amazon can't go on price.

    So give almost the same thing

    but

    with BETTER service, by far! (which is proven over and over again)

    Amazon will make zillions on the apps and books.

    Everyone I know has a kindle and was pretty much just WAITING for the new FIRE!

    Common sense says

    why pay triple for the exact same thing

    Go amazon!

    you take care of your customers!

  • Report this Comment On September 07, 2012, at 12:43 PM, Borbality wrote:

    I'm turned off from the start by Bezos proclaiming that customers just want to be locked in to their proprietary software and services.

    People DO want the device. Apple is the obvious example. you can do what you want on it without trouble. It works fabulously.

    Android works because Google is pretty much the Internet for many of us, who use Google sites every single day and can benefit from devices made for this.

    I just don't see why people would want or need Kindle Fire HD. Just another "ecosystem" (god I hate that term) to have to contend with.

    More and more competing devices (excuse me, i mean SERVICES) are going to lead to consumer fatigue. i don't want a Fire because it's going to have a weird version of Android that tries to get me to use things I don't want (like Amazon Instant Video) and probably not get along well with all my google stuff, which I use every day.

    I don't buy stuff from Amazon or read on Kindle all that often (I can only read so fast), and don't want a device designed only to try to make me do that. With the CEO proclaiming that this is exactly what people want, I'm just confused.

  • Report this Comment On September 07, 2012, at 1:13 PM, akmalmalik1 wrote:

    Apples masterminds betterly opinioned,you see after Samsung case win it is proved in techs and tech desigining investigations is not easy subjectly and practically too but Apple done and proved it,though Amazon great platform and future sketch commercins but investments shared belongs and moves in democratic manners so policies and workings and styles are accordingly miniframed based logics.

    In Apple domains federations among fewers and NASDAQ and others markets holdings not involved in interior policies so public limited matters and international public limited matters some different.So apple do not worries or worried i think just pateroned policy or patronised as well.

  • Report this Comment On September 07, 2012, at 2:50 PM, ObsidianMTness wrote:

    It seems to me that Apple is now on the defensive stance rather than being aggressive with their business plan. They proliferated lawsuits to keep competitors from copying their past innovations. In recent times, they are rolling out products that are improved versions of old releases. Nothing quite innovating and revolutionary as its introduction of the first Macintosh computer, or the first iPhone, iPod, and iPad. It further seems to me that the company is focusing on Steve Jobs' betrayal, although important, rather than his 7 principles for success, which has been the force that allowed Apple to become the super giant tech company of today.

    There are more than one way interpret Jobs' betrayal "to destroy" Apple's enemies. Lawsuit is one costly way, but it doesn't advance the company or its products. The other way is choking off demand for competing product as the iPhone did against Palm, and others by making a far superior innovative product.

    Jeff Bezos does seem to be channeling Jobs as someone else alluded in their comment. Amazon continues to innovate with products as well as services. It is a multifaceted company with a foothold in many areas: books, music, the ultimate store, cloud computing, streaming media, etc., and now tablet computers. Amazon gets into a market & attempts to do everything than its competitors. No wonder it has become the bane of the likes of Walmart, Costco, Barnes & Noble, etc. Now, it may be a thorn on Apple's side as well.

    Apple may loose its way, unless its leaders return to their roots of making revolutionary products and services. Only time will tell whether the mind transmission from Steve Jobs to Tim Cook was successful or even occurred at all.

  • Report this Comment On September 10, 2012, at 1:11 PM, Truth2Power wrote:

    RandomMeaning, IT departments WILL go crazy for Windows mobile: they'll be able to fully integrate existing security and networks into mobile. And the IT departments are the ones who will pick the platform.

  • Report this Comment On September 14, 2012, at 12:16 PM, jrj90620 wrote:

    Amazon is going to need all the help it can get,now that it's prices are going up 9%,here in California,due to collecting sales tax.Sales taxes for Amazon are coming to all states, and when you add in shipping costs,that is in the price,even if Amazon says they're shipping free,Amazon's retail business should start declining.

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