Amazon Unveils Their New Tablet – What To Expect?

According to a report yesterday from the Wall Street Journal, Amazon.com ($AMZN) is expected to launch a new tablet in October.  The device will feature a 9″ screen, Android Honeycomb 3.1, and will not come with a camera, unlike other popular tablets.

Rumors of an Amazon tablet have been circulating for quite a while and Jeff Bezos hasn’t been shy about his ambitions to break into the tablet market.  Several months ago, I discussed these rumors and explained why an Amazon tablet could be a potential gamechanger.

Now that the rumor is officially confirmed, let’s take a look at what to expect from this device.

Amazon Tablet Specifications / Hardware

The device will be manufactured overseas by Quanta computers and will run Android Honeycomb 3.1.  From a hardware perspective, the tablet will have a 9-inch display with no camera.  The tablet is rumored to feature the latest nVidia ($NVDA) Tegra 3 processor, which enables graphics capabilities roughly 2x faster than the previous Tegra 2 CPU.

The tablet will also include a SSD (solid-state hard drive) for local storage, but the big question is how much storage capacity will be included?  I expect Amazon will push for very low storage capabilities (8GB / 16GB) and leverage their cloud platform to deliver content to the device.

As far as wireless capabilities, the tablet should be available in either a Wi-Fi or 3G configuration, which is the same approach Apple takes with the iPad.

The First “Cloud Ready” Tablet

With Amazon Web Services, Amazon has built a legit cloud platform that moves terabytes of data each and every day.  Their AWS platform is massive in scale, hosting everything from Tumblr.com to MP3 albums and streaming video from the Amazon store.  I expect Amazon to leverage their cloud leadership heavily in the new Amazon tablet.

Amazon will encourage customers to download books and music using their Cloud Drive product.  Instead of having to painstakingly download content to the device’s local hard drive, users will be able to download the content to their Amazon cloud drive and then “stream” the content to their tablet using the cloud.  Want to watch or rent a movie? There is always Amazon Instant video.

Amazon has a really great model here by leveraging their investment in the cloud to deliver content.  The “thin client” model makes a lot of sense because it allows Amazon to use a lower capacity SSD (e.g. 16GB), thus reducing the cost of the device considerably.

A Legit iPad Competitor? Definitely.

The iPad is by far the most successful tablet to date, which has painted a big target on Apple’s back.  As one of the only “growth” sectors in consumer electronics, companies are hungry to get a piece of this hot tablet market.  Analysts and experts say that the Amazon tablet is not a direct competitor to the iPad, but I beg to differ.

Amazon knows that Apple is the market leader in this sector and I expect them to position the Amazon tablet as a direct competitor.  Apple and Amazon have duked it out over digital books, music, video, mobile apps, and the tablet market is the next battleground.  The Amazon tablet will include a robust series of applications, flash support, and will likely be ~$100 cheaper than the iPad.  Will Amazon be able to chip away at the iPad franchise?

With their size and scale, Amazon will be able to offer their tablet as a much lower price-point than the iPad.  The device will not include expensive add-ons like a camera or a high capacity SSD, which provides a clue that Amazon is looking to price their tablet aggressively. Feasibly, Amazon could price this device within the $300-$350 range, which would put immense pricing pressure on Apple’s iPad.

Why would Amazon price their device so aggressively?  The idea, which I touched on in my last blog post, is that Amazon would sell the hardware for razor thin margins, but make up for those thin margins through the sale of digital content like books, music, video, and apps. Amazon could essentially earn no margin on the hardware itself, but turn a profit through the sale of digital goods.

Amazon Will Get It Right

Amazon has a track record of “getting it” when it comes to consumer electronics.  The Kindle 1 started off with a lukewarm reception among consumers, selling a paltry amount of units compared to other popular devices like the iPod.  Amazon could have canned it and went back to the drawing board, but instead they listened to customer feedback and created the Kindle 2 and Kindle 3.

Amazon has continued to make incremental improvements to the Kindle and it’s now one of the most successful consumer electronic devices in history.  Amazon.com now sells more eBooks than paper books, which is no small accomplishment.

I expect Amazon to draw from their Kindle experiences and employ a similar strategy in the tablet arena.  The company may not hit the ball out of the park with their first generation tablet, but they will make incremental improvements to the device until it becomes competitive with the iPad.

Will the device be able to go head-to-head with the iPad?  That is still up for debate, but the Amazon tablet is definitely the most viable iPad competitor to date.  We will see what Amazon has up their sleeve when these tablets hit shelves in October.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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