(NASDAQ:AMZN) appears to have found its own weak spot in its impending battle with Apple's (NASDAQ:AAPL) iPad. The New York Times is reporting that Amazon is acquiring Touchco, a maker of flexible touchscreens.

Obviously, speculation suggests that Amazon will quickly put the technology to work in its next Kindle. If consumers flock to Apple's iPad as an e-book reader, Amazon will be forced to compete with the multifaceted device.

A touchscreen on a Kindle would be welcome, but it's certainly not necessary. The real threat is that the iPad -- despite pricing that is two to three times higher than the current Kindle, and slightly more than the jumbo-sized Kindle DX -- will force all e-book readers to become Swiss army knives of computing entertainment. If Joe Kindle sees that Jane iPad can read books, but also play videos, check email, and play games, Kindle owners may feel like they're simply settling.

Amazon needs to be careful here. It can't roll out an upgrade so amazing that it makes its millions of current Kindles in the wild obsolete. Burning early adopters is never a good idea.

What should Amazon do with this new technology? Rolling out a Kindle with a touchscreen interface is logical, provided Amazon preserves the same competitive price point that's currently helping the Kindle succeed against Sony (NYSE:SNE) and Barnes & Noble (NYSE:BKS) among dedicated readers.

However, in the bigger picture, Amazon should also try to put out an iPad clone.

Amazon's digital storefront is already in place. The leading online retailer has been selling digital music, video, and computer games for a long time. Can it put all that together, creating a device that can do it all? One can always argue that Hewlett-Packard (NYSE:HPQ) is already going there with its Microsoft (NASDAQ:MSFT)-powered touchscreen tablet, but an Amazon-branded device with a few proprietary features could also make a dent in this market, if it's pushed as aggressively as the e-tailer has pushed the Kindle.

Will Amazon be able to get away with a Kindle and a grander gadget that does it all? We just won't know until it tries. If Apple's iPad is a winner, Amazon won't have the option to sit this one out.

What should Amazon do with Touchco? Share your thoughts in the comments box below.

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Longtime Fool contributor Rick Munarriz has been shopping online for about as long as has been in business. He owns a Kindle. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.