A rabid reader, I regularly highlight, annotate, and dog-ear books. Which is why I never considered getting an Amazon (Nasdaq: AMZN) Kindle. But recently I discovered I've been stuck in the Dark Ages of reading. The Kindle could be to books what the Gutenberg press was to printing.
There's nothing like being late to the party, you may be thinking. Except it turns out the party is still winding up. For weeks, I've been raving to friends -- people who love to read -- about the Kindle. They initially responded with all the reasons they don't have an e-reader. The same uninformed reasons I didn't have one. Now they may never buy another hardcopy book.
In case you, too, are late to the party, you can highlight, annotate, and bookmark on a Kindle. But wait, there's more! You can search for keywords and change the font size. You can sync across multiple devices. You can have a new book in your hands without even getting off the couch, for less than the price of a hardcopy book. You can carry up to 3,500 books in less space than one paperback needs. You may have to pay people to haul off your old bookshelves.
For folks who hesitate to drop $139 on a Kindle, there's an app for that. It's free for PCs, Macs, iPads, Android devices, iPhones, BlackBerrys, and (ho-hum) Windows Phone 7.
What does this mean for investors? First, market share gains for Amazon. Book sales should continue shifting to e-books as more readers discover e-readers. Because I want to buy e-books from a company that will be around in the future, Borders (NYSE: BGP) -- which is facing a severe cash crunch -- looks risky. With hardcopy books going the way of the dinosaur, I'll also avoid Barnes & Noble (NYSE: BKS). That leaves Sony (NYSE: SNE) and Google as eBook competitors.
Second, while Amazon doesn't reveal Kindle-related revenue or margins, this is a "razor and blade" model. There are no inventory, warehousing, or shipping costs. Margins on Kindle books must be huge.
Despite a rush of tablets that could strike at Amazon's hardware side, Amazon is seeing "very, very strong growth" of Kindle e-readers, apps, and books. That probably won't result in near-term upside surprises. But given so many readers don't know how awesome the Kindle is and how versatile its book platform is, stretching across PCs to smartphones and tablets all the way to e-books, it is unlikely the long-term opportunity is fully in the stock.
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