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.
 

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.
 

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.