Amazon’s Three Difficult Choices

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    Posted: 28 September 2011 05:20 PM #16

    Mav - 28 September 2011 07:41 PM

    But it’s as I’d said before - Amazon fans are already Amazon fans.  Not-quite-so-big Amazon fans probably already shop Amazon anyway.  You can shop on Amazon from anywhere on every major platform.  I can’t see much incremental gain on the Amazon “Stuff” side of things.  You can redirect purchasing power to a degree, but you won’t increase it much in this economy.

    Mav, I think we’re generally in agreement. But it goes back to the simple fact that at $199 this is an exciting product. It’s a bright, shiny object that keeps Wall Street’s eyes away from the sales tax issues about to hit or the perennial margins question.

    The Amazon Prime membership is really great. I actually don’t know how they make money from that, but assuming they do, more members should help them keep the razor-thin margins. Even if only 10% of KF buyers eventually sign up as new Prime members, Amazon could count the whole venture a success.

    Of course this pales in comparison to the profit Apple makes with iPad sales. We at AFB know this, but clearly the market buys into AMZN in a big way. I guess the Bezos reality distortion field is stronger than Steve’s. I’ve long thought AMZN was a Ponzi scheme, but I’m too chicken to bet that it will collapse anytime soon.

         
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    Posted: 28 September 2011 05:33 PM #17

    We don’t disagree.  I didn’t buy puts on AMZN and I don’t intend to in any significant way for a while. 

    WS is dazzled by a very good online retailer with financials far inferior to Apple’s.  What’s new.  I’ve reconciled this long ago.

    We’ll see how far the $199 Fire, Whose Sales Shall Never Be Specified (not that bold a guess), gets Amazon.  Myself, I’m thinking this will hurt Amazon’s margins rather nicely.

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    Posted: 28 September 2011 05:49 PM #18

    Mav - 28 September 2011 08:33 PM

    We don’t disagree.  I didn’t buy puts on AMZN and I don’t intend to in any significant way for a while. 

    WS is dazzled by a very good online retailer with financials far inferior to Apple’s.  What’s new.  I’ve reconciled this long ago.

    We’ll see how far the $199 Fire, Whose Sales Shall Never Be Specified (not that bold a guess), gets Amazon.  Myself, I’m thinking this will hurt Amazon’s margins rather nicely.

    Short-term there is no way they call sell that kit for $199 and make much money.  The estimated BOM for playbook was $180 and the camera probably cuts 10-15 from the price and you save another $10 on memory so best case maybe $150 in parts plus all the marketing and distribution and such.  We all know that that Amazon like Walmart thrives in the low margin environment, what I don’t get is why they are the love of wallstreet.  Look at the P/E of all the other retailers where is the disconnect?  I do most of my shopping via Amazon, but have never bought a digital product since I’m tied to the Apple ecosystem.  Will folks switch from Apple to Amazon for digital goods.  Amazon is offering mostly the same stuff and building out the catalog but the stats say Apple still owns the majority of the digital downloads in all the categories except books.  Will the Kindle Fire which is aimed at the folks trying to save a buck, convert the folks who are comfortable with Itunes?  I doubt it.  Amazon made the jump to the cloud as if folks don’t have a legacy computer with all their content sitting in their house, while Apple will slowly wean folks off their old method via iCloud.  Both models can work, but I don’t think the Fire will slow iPad adoption.  When is the fire coming to China or India or Brazil or the EU for that matter.  The US is a small but lucrative piece of the puzzle.

         
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    Posted: 28 September 2011 07:06 PM #19

    I don’t doubt Amazon the core company.  I’ve always been a happy customer of Amazon’s for the most part.

    We’ll just have to see how the financials work out for the Kindle Fire further down the road.  I still cannot understand why Bezos will not give out sales figures.  Since when is most any company “less transparent” than Apple?

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 September 2011 04:26 PM #20

    I’d forgotten about this lawsuit. Android was buried even deeper on the Nook than it is on the Fire.

    Microsoft’s lawsuit, filed on March 21, alleges that the Nook’s Android operating system infringes upon patents held by Redmond, and that licensing fees should apply.

    http://www.theregister.co.uk/2011/04/27/barnes_and_noble_response_to_microsoft_suit/

         
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    Posted: 30 September 2011 08:57 AM #21

    Drew Bear - 29 September 2011 07:26 PM

    I’d forgotten about this lawsuit. Android was buried even deeper on the Nook than it is on the Fire.

    Microsoft’s lawsuit, filed on March 21, alleges that the Nook’s Android operating system infringes upon patents held by Redmond, and that licensing fees should apply.

    http://www.theregister.co.uk/2011/04/27/barnes_and_noble_response_to_microsoft_suit/

    This would solve any lawsuit issues; assuming HP includes WebOS IP in the rumored sale.

    Amazon has Palm in its shopping cart ? will it click Buy?

    The Kindle Fire is powered by Android, but it?s been heavily customized by Amazon to the point where you can barely tell. By purchasing the remnants of Palm, Amazon would have free rein to redesign webOS to its own liking, and it would be able to further differentiate its Kindle devices from the slew of Android tablets in the market.

    Source: venturebeat blacklisted.

         
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    Posted: 30 September 2011 11:12 AM #22

    Mike Mace has his take on the new Kindle Fire

    Companies trying to sell tablets against Apple were already suffering from slow sales.  Now instead of just being pounded by the iPad hammer, they’ve been undercut by the Kindle anvil.  For most of them, there’s no place to go.  It’s very hard for me to picture how somebody like Samsung is going to get market traction with its current tablet line, and I think the RIM PlayBook, due to its size, is going to suffer against Kindle Fire.  Between slow sales of its current phones and now the PlayBook’s dwindling prospects, I hope RIM has been very very careful about managing its inventory of parts and finished devices.  Otherwise it could end up with a massive inventory writedown in a couple of quarters.

    I will be very interested to see what Barnes & Noble does next with its Nook Color tablet.  Nook Color is similar in many ways to Kindle Fire, but B&N was reluctant to add a lot of Android apps because it was afraid people might buy it as a tablet rather than an e-reader.  Amazon appears to have overcome this fear, and there’s a danger that B&N may have let its opportunity for leadership slip away.  On the other hand, if the next Nook Color has better features than Kindle Fire, Amazon’s announcement might validate B&N’s product and help it sell.

    And then there’s Microsoft, which has a beautiful-looking new Windows 8 tablet interface coming maybe late next year.  I’m excited, I hope it’ll be wonderful, but I’m starting to wonder if any customers will still be available by the time it ships.

    There is still plenty of room in the market for competing tablets, but they’ll need to be aimed at different usages than the iPad and Kindle.  The biggest opportunity is for a stylus-equipped business productivity tool, an info pad (link).  But none of the major hardware companies are working on that; they seem to prefer to bash their brains out competing directly with the iPad.

         
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    Posted: 30 September 2011 12:25 PM #23

    Drew Bear - 28 September 2011 05:36 PM

    I agree with the first half: the KF is competing with non-iPads. I don’t think Amazon is trying to slow down Apple. Their objective is to get more people to buy everything (digital & physical products) from or through them.

     


    Hey, it worked pretty well for iTunes. So basically it’s a good idea.

    And it puts Amazon only a decade or so behind Apple. wink

         
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    Posted: 30 September 2011 12:56 PM #24

    iOSWeekly - 28 September 2011 06:37 PM

      Bring on the 5”-7” ipod touch for $249!

    From your mouth to Tim Cook’s ear!

         
  • Posted: 30 September 2011 01:40 PM #25

    In my family, we have yet to buy any tablet, even an iPad, because we’re realistic about our usage practices.  For what I would want a tablet for, even the iPad still doesn’t cut it.  I’m a college professor, and I would LOVE to be able to use an iPad for doing lectures in class.  It would certainly beat having to lug my 15” MBP back and forth to 8 lectures every week.  It would be even better if I could stream my lectures to the projector via wi-fi or bluetooth.  But, the iPad 2 still won’t do separate video out display, and the iOS version of Keynote is inherently flawed in that it still doesn’t support presenter notes.  If the iPad could do just these two things, I would buy one in a heartbeat.  (Are you listening, Apple?)  The other things I would use an iPad for I can already do with my iPhone, so I see no need to buy an iPad. 

    But, that’s just me.  I think if you really want to see the true use of any tablet, not just iPad, look at how kids use it.  My kids love going to my sister-in-law’s house because she has an iPad 2 and my son loves playing Angry Birds, PvZ, etc., and there are other games and activity apps that my daughter loves on it too.  So as of now, the only reason we’re even considering buy ANY tablet is for our kids use.  That said, the Fire does look appealing; we could get one for each of our kids, and still spend less than the lowest end iPad.  My wife works in IT security, and she’s already said that she’d jailbreak (I don’t know the appropriate term for Android) them, to keep Amazon’s hooks out of the OS, then set them up to make them as kid friendly as possible.  (That I’m not sure about, I’ve never used Android.  But, my daughter is 3, and she picked up how to use iOS on my iPhone in literally, a few minutes.  In fact, when my wife was showing her some of our family pictures on SmugMug, she even reached out and tried to do a swipe on the screen of her laptop to see the next picture!)

    In short, I think where the fire is going to succeed, at least in terms of units sold, is to people who have needs like I do for my kids; basically as a bigger, touch screen version of a GameBoy or a PSP that they can use for music, movies, and games.  That’s all.

         
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    Posted: 30 September 2011 01:52 PM #26

    More random thoughts on the Fire.

    The aspect ratio of the KFire is close to 16:9. That’s great for watching video content, but not so great for reading books, magazines, newspapers or for browsing the web. How many fans of the e-ink Kindle are going to be disappointed with the reading experience on the KF? The KF also loses the battery life, daylight readability and weight advantages of the Kindle reader.

    Steve pointed out last year that a 7” screen only has ~45% the screen area of the iPad’s 9.7” screen. But the KF at 14.6 oz is 68% the weight of the iPad 2 at 21.6 oz. People may be surprised that the small KF weighs nearly a pound. It’s also 11.4 mm thick vs the iPad’s 8.8 mm.

    A number of people present at the event have pointed out that the music player is still very rough. Maybe it’ll work more smoothly by mid-November. Maybe not.

    Finally, I think most consumers are under the impression that the Amazon Appstore contains a high percentage of the 250,000 (or is it back to 200k now?) Android apps available in Google’s Market. The number is actually closer to 10,000.

    Amazon has a great return policy. It’ll be interesting to see how many of the pre-orders from this week’s hype are returned.

         
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    Posted: 30 September 2011 03:57 PM #27

    b0wz3r - 30 September 2011 04:40 PM

    In short, I think where the fire is going to succeed, at least in terms of units sold, is to people who have needs like I do for my kids; basically as a bigger, touch screen version of a GameBoy or a PSP that they can use for music, movies, and games.  That’s all.

    Since your wife will be able to root/jailbreak the Fire, your kids will have access to more games than kids without a tech savvy parent. The Amazon Appstore only has a small fraction (~10k) of the apps available in the Android Market.

    Aside from the larger screen (which is not as sharp), the iPod touch offers a much better solution for music, movies and games. Remember that access to Amazon music & movies is not limited to Fire owners. I can access all the Amazon Prime privileges from my iPod touch.

    I’m sure kids will be more than happy to receive a Fire. The question is will they still be happy with it after a few weeks of playing the same dozen games. That will never be an issue with an iPod or iPad.

         
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    Posted: 30 September 2011 04:49 PM #28

    ibuck - 30 September 2011 03:56 PM
    iOSWeekly - 28 September 2011 06:37 PM

      Bring on the 5”-7” ipod touch for $249!

    From your mouth to Tim Cook’s ear!

    Apple has a history of never imitating the competition.

         
  • Posted: 30 September 2011 04:58 PM #29

    ibuck - 30 September 2011 03:56 PM
    iOSWeekly - 28 September 2011 06:37 PM

      Bring on the 5”-7” ipod touch for $249!

    From your mouth to Tim Cook’s ear!

    I do not believe that Apple will be making a 7 inch tablet. If Apple were going to make a 7 inch tablet, then they would have done so already. But for the reasons spelled out by Steve Jobs, Apple does not think that the 7 inch form factor is suitable for the type of tablet that Apple wants to make.

    In fact, I think that Amazon’s tablet makes it LESS likely that Apple will go into the 7 inch tablet space. Amazon is not coming in with merely a low cost competitor.  The Fire is not a Kia and the iPad a Porsche. It’s more like the Fire is a bicycle and the iPad is a car.

    I mean no disrespect in the above comparison. I have often described the difference between an iPad and a notebook computer using the same analogy with the iPad playing the role of the bicycle. I’m not saying that the bicycle is inferior to the car. I’m saying the job a bicycle is hired to do is entirely DIFFERENT from that of a car.

    The Fire is not just a cheap version of the iPad. It’s trying to create an entirely new category. Whether it succeeds or does not succeed, I do not know. But it is not an iPad competitor. It is its own thing.

         
  • Posted: 30 September 2011 05:06 PM #30

    firestorm - 30 September 2011 07:49 PM
    ibuck - 30 September 2011 03:56 PM
    iOSWeekly - 28 September 2011 06:37 PM

      Bring on the 5”-7” ipod touch for $249!

    From your mouth to Tim Cook’s ear!

    Apple has a history of never imitating the competition.

    Firestorm, we had the same idea, only you said it in 9 words and I said it in 900 words.