Amazon takes on Apple with larger, cheaper Fire
By Lisa Richwine and Alistair Barr
September 8, 2012, 12:03 am TWN
SANTA MONICA, California -- Amazon.com Inc. unveiled larger Kindle Fire tablets on Thursday, challenging Apple Inc.'s dominant iPad with lower prices and a trove of digital content that Amazon hopes will win it a bigger share of the booming tablet market.
The world's largest Internet retailer lifted the lid on devices with price tags ranging from US$159 to US$599. The new tablets come with ads known as “special offers” that appear when screens are locked and in the corner of the home screen, helping Amazon keep prices low.
Last year, Amazon debuted a 7-inch tablet at roughly half the price of the US$499 iPad. In just 10 months, it became the No. 2 tablet in the United States, after the iPad.
Amazon's expanding lineup also intensifies a battle with Google Inc. and Microsoft Corp., who this year entered their own competitors in the booming tablet arena.
The latest aggressive pricing move, and Amazon's variety of gadgets, furthers its goal of getting Kindle tablets into the hands of as many buyers of its online content — from games and books to video — as possible.
Apple, by contrast, makes much of its profit from hardware sales. It sells a single-sized iPad often touted as best-in-breed, at costs ranging from US$399 to US$829, depending on storage capacity, screen resolution and wireless connectivity.
Amazon, which began as an Internet bookstore, will begin shipping on Nov. 20 an 8.9-inch version with a high-definition screen, that works off either Wi-Fi or fourth-generation wireless broadband, known as 4G. The costliest version, at US$599 for 64 gigabytes of storage, undercuts the top-of-the-line US$829 iPad.
“Their first Kindle Fire tablet was a device that said 'See, we can tie all this together,” but it wasn't a strong enough device,” said Forrester Research analyst James McQuivey.
“Now they've really come ready to show that their device line-up is going to be as good as their service line-up. They're tying those two things together, and at a price that is very, very hard to compete with. It's going to push everybody's else's price buttons — including Apple's.”
The premium Kindle Fire HD has a 1920-by-1200 resolution screen, lagging Apple's so-called “retina” display. At 8.9 inches, it is also slightly smaller than the iPad's screen.
At the other end of the spectrum, the cheapest 7-inch Wi-Fi-only Fire goes for US$159. Apple's lowest iPad price tag is US$499.
“Amazon is able to sell these products at or close to cost, while Apple has 40 to 50 percent gross profit margins and has always been very cautious with their product margins,” said Scott Tilghman, an analyst at Caris & Company.
“As Amazon is able to upgrade their products and have competitive hardware it may become more worrisome for Apple,” he added.
Shares in Amazon closed on Nasdaq up 2.1 percent at US$251.38, after hitting an all-time high of US$252.70 during the session.