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Amazon tablets mix best of Kindle and iPad: report

More tablets enter the ring as Amazon preps its own iPad rival to launch in October, according to reports. Can the minds behind the popular Kindle create tablets that stand out?

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Gerber said Amazon's tablet may come with free access to the company's video-on-demand streaming service for at least an introductory period.

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In March, Amazon launched a Cloud Drive service that lets customers store files on its servers. In the same month, it also unveiled an Appstore for Android smartphones and tablets, getting it into the business of selling games. Both moves put it in closer competition with Apple, which offers similar services.

Gene Alvarez, who analyzes Amazon strategy at Gartner, sees the Appstore as a precursor to a tablet from the company.

In May, Reuters asked Amazon Chief Executive Jeff Bezos about a tablet. He declined to comment specifically, but suggested that there was enough room for a rival to Apple.

"It is very useful when you are thinking about how (with) any kind of new product introduction, probably the company is not hoping to completely kill any other company,'' Bezos said. ''They are hoping they can be part of something big.''

While Amazon is encroaching on Apple's turf, Alvarez and others say the online retail giant is launching a tablet for different reasons.

Apple offers content to drive sales of its gadgets, while Amazon wants a tablet to get customers to buy more of its other products.

"At the margin, maybe they can make some money selling a tablet. But Amazon is really doing it to support their core business,'' said Bill Smead, chief investment officer of Seattle-based investment firm Smead Capital Management. "If you sell a new bong once in a while and keep the water clean, people will keep smoking more pot.''

The strategy of having a device that encourages more buying is something that Amazon has already pulled off successfully, according to Anthony DiClemente, an analyst at Barclays Capital.

Amazon announced earlier this year that it is now selling more digital books than physical books, and Barclays' DiClemente said the company's Kindle reading device was the catalyst for that shift.

Amazon's tablet has the potential to do the same for other products the company sells, he added.

"It will strengthen Amazon's strong hold on e-commerce activity and provide a way to move more into video and other digital content,'' the analyst said.

Gartner's Alvarez reckons Amazon is launching a tablet to tap into the growth of mobile commerce.

The total value of mobile payments may reach $670 billion by 2015, from $240 billion this year, according to a recent Juniper Research forecast.

"Mobility combined with online sales capability enables Amazon to be with the consumer at the time they want to purchase,'' Alvarez said. "Prior to mobile commerce, Amazon had to wait until you got in front of a computer.''