As expected, Amazon.com (NASDAQ: AMZN ) announced an updated Kindle Fire lineup this week. The new devices range in price from $139 for a 7-inch Kindle Fire HD with 8 GB of storage to $579 for an 8.9-inch Kindle Fire HDX with LTE and 64 GB of storage. (It also costs an additional $15 to opt out of "special offers," advertisements that automatically display on the lock screen.)
As always, Amazon's strategy with the new Kindle Fires has been to pack in as much performance per dollar as possible. This is part of a broader philosophy of aiming to earn money when people use their devices, rather than trying to earn big profits on the initial sale.
However, compared to Apple's (NASDAQ: AAPL ) iPad, the new versions of the Kindle Fire are likely to be just as unsuccessful as previous iterations. While the new Kindle Fires sport good-looking hardware specifications, Amazon's software ecosystem is vastly inferior to Apple's. As a result, most consumers have been willing to pony up an extra $100-$200 for an iPad, and this will probably remain true this fall.
Amazon's new Kindle HDX line of tablets offer a higher resolution than the Kindle Fire HD line introduced last year: 1,920 x 1,200 for the 7-inch model, and 2,560 x 1,600 for the 8.9-inch model. These compare to a 1,280 x 800 resolution on the 7-inch Kindle Fire HD.
To support these new "Retina"-type displays, Amazon has upgraded from a dual-core 1.5 GHz processor supplied by Texas Instruments to a quad-core 2.2 GHz Qualcomm Snapdragon 800 processor. The new processor is three times more powerful than the Kindle Fire HD processor and is also expected to provide better graphics performance.
Amazon has also added some new features this year. One feature is the "Mayday" button, which instantly links you to live tech support (24/7) on a video call (although the tech support person cannot see you). The tech support agents will be able to walk customers through solutions for any problems they encounter, and will even be able to remotely control the tablet if necessary.
Amazon is also adding new features for watching TV and movies. First, Amazon will allow Prime members to download Prime Instant Video content to their tablets, enabling offline viewing. Amazon also introduced a feature called "Second Screen," which will beam video content to a TV while allowing the user to do something else on the tablet.
Still not a competitor
Many media outlets have portrayed the new Kindle Fire lineup as a significant threat to Apple. However, I see no reason to believe that this iteration will be any more successful than the last batch.
First, Amazon has followed Google by raising the starting price of its 7-inch Kindle Fire HDX tablet to $229, the same price as the new Nexus 7 tablet. This moves it $30 closer in price to the iPad Mini. (People who are really looking for a budget tablet will drop down to the $139 Kindle Fire HD, but those people would never have bought an iPad anyway.)
Second, Amazon cannot match the iPad ecosystem. Canalys recently condemned Android tablets for having much lower-quality tablet apps, not to mention a huge numerical deficiency (375,000 iPad-optimized apps, vs. less than 100,000 tablet-optimized Android apps).
Unfortunately, it gets worse. Amazon does not allow Kindle Fire users to access the Google Play store, sending customers to the Amazon app store instead. Kindle Fire tablets therefore have an even worse selection of apps than other Android competitors such as the Nexus 7.
The result is a huge customer preference for the iPad. The overwhelming popularity of the iPad repeatedly shows up in web usage statistics. While the U.S. is by far Amazon's top market for Kindle Fire tablets, iPads represent a whopping 84% of U.S./Canada web traffic, compared to less than 6% for Amazon tablets!
No threat at all
Amazon will probably sell 5 million to 10 million tablets this fall and then very little thereafter, as has apparently been the case during the last 2 product cycles. By contrast, Apple sold nearly 23 million iPads in the 2012 fall quarter despite severe supply constraints. With Apple expected to release a 5th-generation full-size iPad and a 2nd-generation iPad Mini next month, there is every reason to believe that it will surpass last year's total this fall.
Amazon's new tablets may be worth a look for Prime members who watch Prime Instant Video a lot and don't want to pay much for a tablet. However, they are not likely to have a major impact on Amazon's revenue or earnings, and will not win many customers away from Apple's iPad.
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