[Bobcat665]

Source:

Looks like Apple’s iPad is Kindle Fire-proof - The Globe and Mail

Looks like Apple’s iPad is Kindle Fire-proof
Chris Ciaccia
New York— TheStreet
Published Friday, May. 04, 2012 4:07PM EDT
Last updated Friday, May. 04, 2012 4:10PM EDT


With margins always a concern for Amazon (AMZN-Q223.99-5.46-2.38%) investors, the company can ill afford to lose market share for the Kindle Fire, the product designed to tie everything it does together.

But it looks like the tablet could have its flame extinguished if Amazon fails to keep pace with the competition on innovation.

A new survey by research firm IDC estimates the Kindle Fire lost significant market share in the first quarter, dropping down to 4 per cent from 17 per cent in the fourth quarter.

Apple (AAPL-Q565.25-16.57-2.85%) was the main winner here, taking 68 per cent market share, up from 54.7 per cent in the fourth-quarter of 2011. As tablet sales overall slowed in the first quarter of 2012, Apple continued to dominate the market profoundly, and this could potentially be the beginning of the end for Amazon, if it fails to innovate.

One hedge fund analyst, who declined to be named, expects Amazon to release another one or two versions of the Kindle Fire to try to get it right, but if they don't, Amazon could be in big trouble. “Game over,” he said, when asked if Amazon was in trouble.

“Apple reasserted its dominance in the market this quarter, driving huge shipment totals at a time when all but a few Android vendors saw their numbers drop precipitously after posting big gains during the holiday buying season,” said Tom Mainelli, research director, Mobile Connected Devices at IDC in the press release. “Apple's move to position the iPad as an all-purpose tablet, instead of just a content consumption device, is resonating with consumers as well as educational and commercial buyers.”

A major factor in Apple reasserting its dominance appears to be lowering the price on its iPad 2 to $399 from $499, which it did when it announced the new iPad in March. “And its decision to keep a lower-priced iPad 2 in the market after it launched the new iPad in March seems to be paying off as well,” said Mainelli in the release.

The complaints about the Kindle Fire include a lack of features and shoddy Internet browsing, and perception of the product is such that rivals feel comfortable getting in little digs.

Barnes & Noble (BKS-N17.90-0.08-0.44%) CEO William Lynch said on the company's fourth-quarter conference call he had heard about some “quality issues with our biggest competitor” on their new product, with most presuming this to be the Kindle Fire. Lynch said he heard of return rates between 15 per cent and 25 per cent for the tablet.

Barnes & Noble recently announced a deal with Microsoft (MSFT-Q30.98-0.78-2.46%) to expand its tablet offering, the NOOK.

Another hedge fund analyst, who is short Amazon, believes the company is out of its league when it comes to the competition in the tablet space.

“The Kindle Fire is behind. [Amazon] is competing with engineering companies, like Apple. Getting kicked out of Target (TGT-N55.65-0.90-1.59%) was a big deal with Target fighting back on show-rooming. It could come out of a lot of retail destinations,” she said over the phone.

Amazon has to get the Kindle Fire strategy right because the tablet, which it sells below cost, is supposed to be the main driver for growing media sales, currently 30-40 per cent of its overall revenue. The company won't be able to deliver revenue growth of 20 per cent year-over-year if media is falling, the hedge fund analyst said. “It's still crucial to their success,” she said.

As rumours of a mini-iPad swirl, Amazon may have to announce a larger product to keep Apple from taking even more market share than it already has.

IDC's Mainelli said that he expects a “new larger-screened device from Amazon at a typically aggressive price point,” otherwise Apple may wind up completely shutting Amazon out.

The hedge fund analyst who is short Amazon put it best. “If Apple has a $299 offering for Christmas, I don't think a $100 difference will hurt Apple. Why would anyone buy Amazon when you can buy Apple?”

It looks like Amazon's decision to snub RIM and go it alone in the tablet market might not be playing out that well for them.
Maybe they should release an official Kindle app for the PlayBook already.
I think it might be awfully foolish of them to continue to refuse...

[Premium1]

I think it makes sense. I mean the kindle fire is more of an e-reader than it is a tablet and that's how people look at it as.

[Tre Lawrence]

I think it makes sense. I mean the kindle fire is more of an e-reader than it is a tablet and that's how people look at it as.

Problem is that, right or wrong, more people think it as more of a tablet than anything RIM has mustered up to this point.

It's mostly an opinion piece fueled by the same short selling "analysts" that are hated by the diehards, but it is an interesting piece nonetheless. I am not a fan of the Fire.

[sf49ers]

Amazon is making razor thin profits and I doubt if Kindle is the correct strategy for them because they can't keep up with the engineering companies like Apple, RIM and Samsung or they soon saturate the North American market and beyond that they don't have distribution channels to reach other parts of the world, what they need to do is partner with Android OEMS and companies like RIM, Dell etc for content sales. Doing so they will have a mass reach they ever could do with a Kindle and moreover it is not like Kindle has 30% profit margins on it.

[Premium1]

Amazon is making razor thin profits and I doubt if Kindle is the correct strategy for them because they can't keep up with the engineering companies like Apple, RIM and Samsung or they soon saturate the North American market and beyond that they don't have distribution channels to reach other parts of the world, what they need to do is partner with Android OEMS and companies like RIM, Dell etc for content sales. Doing so they will have a mass reach they ever could do with a Kindle and moreover it is not like Kindle has 30% profit margins on it.

Amazon prices it so low because they rely on their services to make back the revenue for them.

[Premium1]

Problem is that, right or wrong, more people think it as more of a tablet than anything RIM has mustered up to this point.

It's mostly an opinion piece fueled by the same short selling "analysts" that are hated by the diehards, but it is an interesting piece nonetheless. I am not a fan of the Fire.

I am not and was not never a fan of the fire. Honestly I would be more likely to give the playbook a shot over the fire if I decide to buy a tablet.

[Mystic205]

Kindle is #1 eReader and #2 Tablet, so its a hard stretch to say that its not the correct strategy.

Understand that the Kindle is a razor, and the Amazon store is the razor blades.. and anyone who bothered to look would have noticed that Amazon revenue and margins blew thru both guidance and estimates for the last quarter.. both validating and supporting evidence that the Kindle & KF IS the correct business strategy.

As with the regular trickle of new ereader devices, it doesnt take much of a stretch to consider a new KF by thanksgiving..

Amazon is making razor thin profits and I doubt if Kindle is the correct strategy for them because they can't keep up with the engineering companies like Apple, RIM and Samsung or they soon saturate the North American market and beyond that they don't have distribution channels to reach other parts of the world, what they need to do is partner with Android OEMS and companies like RIM, Dell etc for content sales. Doing so they will have a mass reach they ever could do with a Kindle and moreover it is not like Kindle has 30% profit margins on it.

[sf49ers]

Amazon prices it so low because they rely on their services to make back the revenue for them.

the whole point is they are not selling as many devices as they wanted to, they can't sell at $100 a piece and hope to recover their investment from content sales if they can't penetrate into the market and have at-least a share of 50% or more. My point is what's the point when you can't get beyond 10% market share and not let anyone sell your content? And more importantly they can make hardware and still partner with other vendors and it is not like as if they are going to loose money by partnering because they are anyways losing money by selling Kindles at a discounted rates.

[sinsin07]

When the term RIM/Amazon partnership is referred to what exactly is the vision? An icon on the Playbook to view/purchase movies and purchase music?

[sf49ers]

Kindle is #1 eReader and #2 Tablet, so its a hard stretch to say that its not the correct strategy.

Understand that the Kindle is a razor, and the Amazon store is the razor blades.. and anyone who bothered to look would have noticed that Amazon revenue and margins blew thru both guidance and estimates for the last quarter.. both validating and supporting evidence that the Kindle & KF IS the correct business strategy.

As with the regular trickle of new ereader devices, it doesnt take much of a stretch to consider a new KF by thanksgiving..

how much did they make? $150 million profit on $30 billion revenue? had they partnered with OEMS they would have made $300 million if not $1 billion, RIM made 10 times more profit than amazon in the past year?

[Economist101]

how much did they make? $150 million profit on $30 billion revenue? had they partnered with OEMS they would have made $300 million if not $1 billion, RIM made 10 times more profit than amazon in the past year?

Their revenue last quarter was closer to $13 billion, but you're only off by 130%. Profit was $130 million.

http://money.cnn.com/2012/04/26/tech...ings/index.htm

RIM, on the other hand, posted a $125 million loss.

[sinsin07]

Their revenue last quarter was closer to $13 billion, but you're only off by 130%. Profit was $130 million.

Amazon Q1 profit blows estimates away - Apr. 26, 2012

RIM, on the other hand, posted a $125 million loss.

It strange that after so much time and so many corrective post by you people have not learned to look up some facts before they post numbers.

[TGR1]

Kindle is #1 eReader and #2 Tablet, so its a hard stretch to say that its not the correct strategy.

Understand that the Kindle is a razor, and the Amazon store is the razor blades.. and anyone who bothered to look would have noticed that Amazon revenue and margins blew thru both guidance and estimates for the last quarter.. both validating and supporting evidence that the Kindle & KF IS the correct business strategy.

As with the regular trickle of new ereader devices, it doesnt take much of a stretch to consider a new KF by thanksgiving..

Kindle Sales Plunge Made Amazon.com's Gross Margin Look Better - Seeking Alpha

According to this analyst's well-argued piece, Amazon's margins improved *because* Fire sales tanked. Furthermore, because the e-ink supplier is well-known, it is also pretty well argued that the Fire is badly hurting e-ink Kindles. Overall, the Fire strategy doesn't seem sustainable either.

If RIM can maintain quality and somehow keep costs down, the Playbook has a chance. But clearly neither ultra cheap nor ultra premium work that well in the tablet market currently.

ETA: And tanked so badly they slipped in one quarter all the way to third.

BTW, for this reason I don't think partnering with Amazon is at all a good idea for RIM. They have infrastructure but a very high risk business strategy (cut prices and margins to squeeze their competitors out) that doesn't leave much of a war chest

[sf49ers]

Their revenue last quarter was closer to $13 billion, but you're only off by 130%. Profit was $130 million.

Amazon Q1 profit blows estimates away - Apr. 26, 2012

RIM, on the other hand, posted a $125 million loss.

yes that is my point, they made so little profit on so much revenue.

RIM's last quarter loss is a accounting thing and not that they lost money, they are anyways going to sell that inventory in this quarter or the next and not that they are going to dump it off. FYI..RIM made close $2.4 billion in profits last year alone before $900 inventory write offs, how much did amazon make last year?

[addicted44]

it is also pretty well argued that the Fire is badly hurting e-ink Kindles.

I found this aspect of the whole Kindle Fire saga most interesting. By releasing the Fire, under the Kindle brand, which is synonymous with eReading, they have made tablets with LCD screens an acceptable eReading device, so people are also opting to read on their iPads and Playbooks.

Anecdotally I knew several people who used both iPads and Kindles, who don't use their Kindles anymore.

[Mystic205]

Given that one headline could equally have been rewritten to "Kindle Fire solid #2 as iPad sales tank" there is a clear iPad bias in the Bloomberg article. I also see flaws in data, assumptions and the presentation of conjecture as facts in the Santos piece (though well written).

From experience (of doing exactly just this) i know you can use any data to prove whatever you like if your motivation is strong enough, so given the author of that report has recommended shorting AMZN stock, he was clearly motivated to back up his stance in the light of a good quarter and a 30% price rise this year..

I do my own company and market assessments and never use web commentary as an input for my analysis...and so we can simply differ on viewpoint w/o discussion.

Back on topic..
As far as a RIM/AMZN partnership.. my knee reaction is that I currently fail to see any solid logic behind this.. though i have spent less than 5min considering it I see no value to AMZN given RIM market position and little to none for RIM given current priorities.

Kindle Sales Plunge Made Amazon.com's Gross Margin Look Better - Seeking Alpha

According to this analyst's well-argued piece, Amazon's margins improved *because* Fire sales tanked. Furthermore, because the e-ink supplier is well-known, it is also pretty well argued that the Fire is badly hurting e-ink Kindles. Overall, the Fire strategy doesn't seem sustainable either.

If RIM can maintain quality and somehow keep costs down, the Playbook has a chance. But clearly neither ultra cheap nor ultra premium work that well in the tablet market currently.

ETA: And tanked so badly they slipped in one quarter all the way to third.

BTW, for this reason I don't think partnering with Amazon is at all a good idea for RIM. They have infrastructure but a very high risk business strategy (cut prices and margins to squeeze their competitors out) that doesn't leave much of a war chest

[blackberryto]

I disagree, I think a RIM/Amazon partnership is a marriage made in heaven. Amazon used their own version of Android for the Kindle, which is probably the main reason it has a subpar user experience, including web browsing. Android is a fragmented ecosystem to begin with and many question marks remain with Google purchasing Motorola, but Amazon is not doing themselves any favours by playing around with software when it is not their area of expertise. They would be much better off using an OS out of the box and ready to go like BB10. And why would RIM let them do that? RIM needs to get BB10 devices into the hands of more people to drive developers to make applications. Amazon can help do that. And Amazon is interested in making low-end devices with marginal hardware to drive consumption of their content. RIM wants to sell high-end hardware, and needs to have content as part of the package. So in reality, RIM and Amazon can co-exist and help each other out. RIM can license to Amazon BB10 for free and in exchange RIM can have access to Amazon's library of content for Blackberry devices. And RIM gets the added bonus of more people using BB10 devices which should drive developer desire to be involved with BB10. This is a marriage made in heaven, hopefully Amazon and RIM make it happen.

[TGR1]

From experience (of doing exactly just this) i know you can use any data to prove whatever you like if your motivation is strong enough, so given the author of that report has recommended shorting AMZN stock, he was clearly motivated to back up his stance in the light of a good quarter and a 30% price rise this year..

Absolutely one has to read with a critical eye. I must say my agreement with him largely arises because, while I am a very happy Amazon customer, I have viewed the company with a skeptical slant from its inception and through the years when I thought it would never make money. It's why I personally think Bezos is one of the most capable CEOs around; the way he owns his shareholders is remarkable.

Back on topic..
As far as a RIM/AMZN partnership.. my knee reaction is that I currently fail to see any solid logic behind this.. though i have spent less than 5min considering it I see no value to AMZN given RIM market position and little to none for RIM given current priorities.

Agree with this.

[robsteve]

I doubt there will be any major partnership between RIM and Amazon. Just think who RIM'S major customers are; municipal, federal, and state governments. Amazon facilitates tax avoidance , costing these entities a great deal of revenue.