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amazon producing 5 million Kindle fires for Q4? Survey indicates lost iPad sales…
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It took a couple of years for a true iPhone competitor to emerge in the market - I guess we had to expect a capable iPad competitor to arrive eventually…
...then again this thing hasn’t even shipped yet, so could be a disaster for Amazon.
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Production is one one side of the coin; sales the other. We have yet to see which way the flip of the coin lands.
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5 Million selling at a $50/unit LOSS = 250,000,000 HIT to earnings.
Coming from a firm with net margins of 4%
And this is considered GOOD, with the firm now with an 111 P/E ratio?
Apple with margins of 40% and an 14.7 P/E ratio?
OK, here is what AAPL has to do, SELL AT A LOSS, and the stock will SHOOT UP, from $400/share to $2,960/share!
Why didn’t Steve and Tim think of that??
{ /sarcasm }
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“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
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John Molloy
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Will Just add that as of yet, no one outside of Amazon has been allowed to touch one. At the launch they had minders operating each one in areas for each specific function of the device. Reminds me a lot of the Xoom launch.
Look this could be enormous, but at the moment it is still very much up in the air.
The lack of letting people actually touch them at the launch, six weeks from release, smelled really off.
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A lot of people who will buy the Kindle Fire never, never would have bought an iPad.
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One: -> NOT ONE, not a single one, has been actually SOLD.
Two: -> How many “iPad Killers” have we endured as the media whores flogging for HITS, naming first one after the other, as THE iPAD KILLER over the past 18 months?
Three: -> I could have SWORN, that the system was designed to REWARD PROFITS, but what do we see now, GOOG giving it away for FREE, and now AMZN selling at a huge loss per unit?
Call me nuts, but seriously, are the analysts and TV hacks, the most STUPID humans alive today, or are they just the product of our seriously deficient educational system?
This really has me STEAMING this morning…..
[ Edited: 10 November 2011 01:12 PM by TanToday ]Signature
“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
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I would not be surprised if Amazon has ordered 5 million Fires. But the “Survey (that) indicates lost iPad sales?” is pure idiocy.
That survey first identified people who had already ordered or were very likely to order the Fire. That turned out to be 5% of 2600 = 130 people. They then asked those 130 people if they were “delaying” purchase of an iPad. 34 of them (26%) said yes. As someone has already pointed out, probably 33 of them never had any intention of buying an iPad.
What. The. H&^%?
I think the predictive value of these surveys is minimal. But let’s take a look at one done in March of this year, right after the iPad 2 hit the shelves.
...a proprietary survey of 2,000 potential customers conducted from March 14-23…In that survey, 28% of respondents said they planned to buy an iPad 2…
So 560 out of 2,000 people surveyed said they planned to buy an iPad 2. How many of those 560 people would “delay” purchase of a Fire? 80%? 90%?
Finally, let’s look at the real numbers…dollars.
5 million Fires @ $200 = $1 B revenue
We’ll be generous and say Amazon breaks even on hardware sales, so $0 profit.14 million iPads @ $600 = $8.4 B revenue
We’ll be conservative and say iPad margins are 30%, so ~2.5 B profit.Amazon will have essentially no effect on Apple sales. A more useful survey would have been to ask how many people are waiting for the Fire instead of buying the Galaxy Tab 10.1 or any of the dozens of other Android tablets gathering dust in warehouses & store shelves.
Of course that survey would not have garnered any headlines, so they decided to go with one that is meaningless and misleading.
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Beautiful post, Drew Bear !
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Oh no. Competition.
Apple is doomed!
(/sarcasm)
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The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
To date, after YEARS, Amazon has NEVER EVER released *ACTUAL SALES NUMBERS* for their readers/tablets.
All they ever say is ‘great sales!’ And the markets cheer them on, Apple on the other hand, is actually transparent in their sales, and they get hammered for NOT HITTING, numbers that others THINK they should have achieved.
Everyone says “Apple is priced to perfection” in stock pricing, when the truth is, they are PENALIZED constantly, for what others promise, allude to, or give away for FREE.
Amazon announces profits DOWN 75%, and the stock isn’t killed, Apple “misses” with *ONLY* a 58% GAIN, and the markets crucify them.
Call me perplexed.
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“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
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A lot of people pretty sure on here of no threat from Amazon.
Amazon has a very large pre-existing user base of Kindle owners - there is no reason why a satisfied owner of a kindle wouldn’t consider a Kindle Fire if they were looking to buy a tablet. Kindle is a strong brand, 2nd only to apple in the tablet space.
$199 is a psychologically important price point for consumers, expecially when it comes to gift giving season this december. At $199 the kindle Fire can: Browse the Web with a good browser, download games & ebooks/video from Amazon. Web browsing / games / books& media are the 3 core uses of the iPad - amazon is about to release a device that does all 3 functions at a price 60% cheaper than the entry level iPad.
Amazon is expanding the kindle range into 16,000 US retail stores - the Fire will be available at Walmart, best buy, target etc.
The negative effect on iPad sales may not be that large, but it could easily be more than a million units.
You are not thinking straight if you think Apple will maintain its current 70% + tablet marketshare indefinitly - but it wont be a disaster if it “only” has 40-50% marketshare if the marktet in 5 years is 500 million tablets annually - it will infact be an embarresment of riches.
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Full Disclosure:
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- Pro: Apple HDTV, iPhone Air, Stock split, Consumer robotics -
A lot of people pretty sure on here of no threat from Amazon.
Amazon has a very large pre-existing user base of Kindle owners - there is no reason why a satisfied owner of a kindle wouldn’t consider a Kindle Fire if they were looking to buy a tablet. Kindle is a strong brand, 2nd only to apple in the tablet space.
$199 is a psychologically important price point for consumers, expecially when it comes to gift giving season this december. At $199 the kindle Fire can: Browse the Web with a good browser, download games & ebooks/video from Amazon. Web browsing / games / books& media are the 3 core uses of the iPad - amazon is about to release a device that does all 3 functions at a price 60% cheaper than the entry level iPad.
Amazon is expanding the kindle range into 16,000 US retail stores - the Fire will be available at Walmart, best buy, target etc.
The negative effect on iPad sales may not be that large, but it could easily be more than a million units.
You are not thinking straight if you think Apple will maintain its current 70% + tablet marketshare indefinitly - but it wont be a disaster if it “only” has 40-50% marketshare if the marktet in 5 years is 500 million tablets annually - it will infact be an embarresment of riches.
I actually think the Kindle Fire will do very well in the market and will sell in the millions of units. I was just online playing MW3 with my nephew and he said he was buying one for his sister and mom/dad. the price point is compelling if all you need is a web browser. If I was buying a kid toy for the back of the car for road trips, $200 is a nice price but I can get an iPod touch for the same price and it has a much larger game library.. Amazon will sell out this Christmas, the real question is the sustainability of their business model. Where is the hidden profit that they will extract. Prime is the most obvious choice since they make zero on the hardware. Apple has established the price points for the selling of digital stuff and they claim that they operate iTunes at just above break-even so Amazon can’t make much but Amazon thinks a 10% margin is fat and Apple thinks anything under 30% is thin.
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You have to separate the existence of competition from adverse impact on Apple’s growth.
Apple has been embroiled in competition throughout most of its corporate life! How, how can it possibly grow! Or keep growing?!
The Kindle Fire will sell reasonably well enough because it’s $199. So? Dumb smartphones and feature phones will also sell in the many millions because they’re cheaper, free, or fill a “void” where Apple doesn’t play. Same goes for all the hundreds of millions of PCs every year Apple doesn’t sell.
Focus on the true tests and metrics. At $199, a super-small-screen and lesser refinement and features (such as cameras and 3G), the Kindle Fire is not really meant to compete with iPad although it is a tablet. Lower-cost, so what. Competitors can sell tablets, same deal. Apple is not a monopolist in any market it plays in. The tablet market, like the smartphone market, is in the early stages of growth and multiple players can grow and co-exist. All I care about is Apple’s growth. The prior year compare is 7.33M and I would look to see the holiday quarter number at 14.66M or better.
THAT is how you know how well Apple is faring.
[ Edited: 10 November 2011 09:21 PM by Mav ]Signature
The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
It should also be noted that the Kindle Fire is (AFAIK) US only. And Apple gets 2 thirds of its sales internationally.
So Amazon isnt anywhere near a threat on the global stage as of yet, and probably wont be a factor until xmas 2012.
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Upon reflection, and further thinking on the matter of competitors using a program of essentially giving away their product in hopes of making it up on another set of sales.
Essentially you are making the assumption that a loss today will turn into profit tomorrow. While this may seem to make sense in a field where technology is rapidly changing you are betting that competitors will stay static and not leapfrog your basic program with better products at equivalent or lower prices. One only has to look at the ultra-low-cost tablets that are even now available in China to see that a kindle fire is even today available with more horsepower better specifications and lower prices than even Amazon seeks to price things at this moment.
So essentially the loss is immediate and the hope for profit is elusive and predicated upon some future actions of your customer that may or may not happen. Good business practices would seem to reward a profit today in hand and bank versus a loss today and a dream of potential profits in the future.
Reflecting on history this is exactly the paradigm that led to the blowup of the dot.com industries that all were losing money and promising to make it up in the future. We all see where that strategy was fatally dangerous and lead to entire industries cratering out.
{created with the spanking new Dragon Dictate MINI version, released today and available on the App Store. Works pretty well, first time I’ve used it. }
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“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
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Where is the hidden profit that they will extract. Prime is the most obvious choice since they make zero on the hardware.
I had been an investor in AMZN for over five years, so I watch them constantly, got stopped out 18 months ago, and didn’t rebuy thinking the P/E was insane.
Anyway, the FACTS are, AMAZON PRIME brings in $500 million/yr. The two day expedited shipping COSTS them $900 million a year. Essentially PRIME, is a massive loss leader for Amazon, and this doesn’t count the newly added PRIME goodies, like the free movies/tv, and now the “lending library” of free books.
Honestly, when you are running on 4% margins, how can MORE loss leaders = anything BUT a disaster down the road?
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“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
