Kindle Fire vs. iPad—Initial Impressions

  • Posted: 25 November 2011 10:07 AM

    Shortly before the iPad was first announced, I was excited about its potential because I owned a Kindle (second edition, I think) and an iPod Touch. The notion of a device combining their functionality in a single, larger device was compelling.

    I ordered the iPad 1 in the first hour of availability, and I’ve been a very satisfied customer ever since, including my upgrade to an iPad 2 when it first was released.

    When Amazon announced the Kindle Fire, I ordered one immediately—mainly for market research purposes but also because it looked like a compelling value. I have been using it now for more than a week.

    I have to admit I was impressed with the Kindle Fire right off the bat. For only $199, it offers a solid media consumption device with a surprisingly nice screen. Setup could not have been simpler, putting Apple to shame, although I think most of the difference will be offset by iCloud (presumably no need for tethering in the future) as well as a reality check that my iPad has a lot more memory (and thus more stuff to sync). The hardware obviously wasn’t as nice and the power button was awkwardly placed and too easy to inadvertently push, but seriously it is hard to complain about that with a very competent device priced at around $200.

    One of the most compelling things about the Kindle Fire is that it doesn’t require any commitment or effort to use (which is saying a lot when comparing to an Apple device), and its low price makes it just seem like a great value. Setup is a breeze. Content can be purchased easily. The cloud versus device setup for content is really simple to utilize. For previous Prime customers, the free streaming movies are a nice value. And it offers most (but definitely not all) of the apps that I would want to use on a regular basis. Apparently the criticisms about the jerkiness of the forked Android OS were fixed in an update as I didn’t seem to have those problems. Although iOS is prettier and a bit smoother, my user experience wasn’t that much worse because I have just used the Kindle Fire to purchase and consume movies and books. I would not even try to read a magazine on the Kindle Fire, however, as the screen size is just too small.

    For a few days, I kind of had a crush on the Kindle Fire (amazement at value of the device) and was starting to worry about iPad’s vulnerability, but I since have come to a different conclusion. Perhaps most importantly, when I reach for a tablet, I’m now reaching just for my iPad because I don’t have to make any compromises to use it. But we have found our Kindle Fire to be useful as a second device (e.g., movies for the kids on the road).

    For folks like me who aren’t that price sensitive in this price range (i.e., $200 for Kindle Fire vs. about $500-830 for iPad 2), the iPad 2 is an easy choice because of its larger screen, more functionality (e.g., 3G) and broader app selection. The screen size, in particular, makes it a much more compelling device to use for work applications, in my personal experience.

    I guess the bottom line is that I’m confident Kindle Fire will be the #2 selling tablet for at least the next few months, and they definitely will sell a significant number of them (maybe 3-7MM over the next six months). What is harder to determine is the impact on iPad sales. My rough sense is that it will only marginally impact iPad sales in the short term (not because the sales will be small, but rather because it will pick up another piece of the market), and might actually help in the longer term as it may broaden interest and acceptance of the tablet category.

    I do think Amazon could become a worthy, direct #2 tablet competitor to the iPad once/if they come out with a device with a comparable screen size. At that point, I do think we could see some significant iPad competition. However, my guess is that the functionality and refinement (e.g., retina display) of the iPad will grow to an extent that it will still remain the comfortable market leader, albeit with market share perhaps slipping from around 90 percent today (my estimate) to perhaps 70 percent or so.

    Keep in mind that I really agree with Tim Cook’s forecast that the tablet market will become larger than the PC market, so 70 percent of roughly 500MM units/year still feels pretty good. And I bet we will get there within 3-4 years.

    By the way, I think 2012 is setting up to be a huge year for AAPL. P/E can’t go much lower and earnings growth prospects look terrific, not even counting a potential new device category.

         
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    Posted: 26 November 2011 12:54 AM #1

    PurpleApple - 25 November 2011 02:07 PM

    Shortly before the iPad was first announced, I was excited about its potential because I owned a Kindle (second edition, I think) and an iPod Touch. The notion of a device combining their functionality in a single, larger device was compelling.

    I ordered the iPad 1 in the first hour of availability, and I’ve been a very satisfied customer ever since, including my upgrade to an iPad 2 when it first was released.

    When Amazon announced the Kindle Fire, I ordered one immediately—mainly for market research purposes but also because it looked like a compelling value. I have been using it now for more than a week.

    I have to admit I was impressed with the Kindle Fire right off the bat. For only $199, it offers a solid media consumption device with a surprisingly nice screen. Setup could not have been simpler, putting Apple to shame, although I think most of the difference will be offset by iCloud (presumably no need for tethering in the future) as well as a reality check that my iPad has a lot more memory (and thus more stuff to sync). The hardware obviously wasn’t as nice and the power button was awkwardly placed and too easy to inadvertently push, but seriously it is hard to complain about that with a very competent device priced at around $200.

    One of the most compelling things about the Kindle Fire is that it doesn’t require any commitment or effort to use (which is saying a lot when comparing to an Apple device), and its low price makes it just seem like a great value. Setup is a breeze. Content can be purchased easily. The cloud versus device setup for content is really simple to utilize. For previous Prime customers, the free streaming movies are a nice value. And it offers most (but definitely not all) of the apps that I would want to use on a regular basis. Apparently the criticisms about the jerkiness of the forked Android OS were fixed in an update as I didn’t seem to have those problems. Although iOS is prettier and a bit smoother, my user experience wasn’t that much worse because I have just used the Kindle Fire to purchase and consume movies and books. I would not even try to read a magazine on the Kindle Fire, however, as the screen size is just too small.

    For a few days, I kind of had a crush on the Kindle Fire (amazement at value of the device) and was starting to worry about iPad’s vulnerability, but I since have come to a different conclusion. Perhaps most importantly, when I reach for a tablet, I’m now reaching just for my iPad because I don’t have to make any compromises to use it. But we have found our Kindle Fire to be useful as a second device (e.g., movies for the kids on the road).

    For folks like me who aren’t that price sensitive in this price range (i.e., $200 for Kindle Fire vs. about $500-830 for iPad 2), the iPad 2 is an easy choice because of its larger screen, more functionality (e.g., 3G) and broader app selection. The screen size, in particular, makes it a much more compelling device to use for work applications, in my personal experience.

    I guess the bottom line is that I’m confident Kindle Fire will be the #2 selling tablet for at least the next few months, and they definitely will sell a significant number of them (maybe 3-7MM over the next six months). What is harder to determine is the impact on iPad sales. My rough sense is that it will only marginally impact iPad sales in the short term (not because the sales will be small, but rather because it will pick up another piece of the market), and might actually help in the longer term as it may broaden interest and acceptance of the tablet category.

    I do think Amazon could become a worthy, direct #2 tablet competitor to the iPad once/if they come out with a device with a comparable screen size. At that point, I do think we could see some significant iPad competition. However, my guess is that the functionality and refinement (e.g., retina display) of the iPad will grow to an extent that it will still remain the comfortable market leader, albeit with market share perhaps slipping from around 90 percent today (my estimate) to perhaps 70 percent or so.

    Keep in mind that I really agree with Tim Cook’s forecast that the tablet market will become larger than the PC market, so 70 percent of roughly 500MM units/year still feels pretty good. And I bet we will get there within 3-4 years.

    By the way, I think 2012 is setting up to be a huge year for AAPL. P/E can’t go much lower and earnings growth prospects look terrific, not even counting a potential new device category.

    Very nice summary. 

    Do you think people are holding off buying an IPad2 because the IPad3 is expected next spring (similar to this last quarter with IPhone 4 buyers waiting for the IPhone 5)?  I myself don’t think this is the case during the Christmas season, but could happen in 1Q12.

         
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    Posted: 26 November 2011 10:56 AM #2

    Read some customer reviews - not good

    On top of that, some people believe that Amazon is deleting negative reviews.

         
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    Posted: 26 November 2011 03:16 PM #3

    I hope Amazon sells millions of Fire.  The more the better as far as I am concerned.

    They are not battling the iPad but rather the Nook.  These two companies will race each other for the biggest loss on tablets.

    The notion that all those millions will suddenly buy $10 books and .99 games to give Amazon more income is just insane.

    Those who don’t want to spend the extra $300 for a real iPad will not suddenly spend $100 more on music, apps, or books.

    Apple has enjoyed tremendous success with iTunes revenue growth.  But Amazon forgot several factors that contributed to that success.  it took Apple 10 years with a breaking even business model, 150 million iPods and 250 million iOS devices to generate $1.7 Billion dollar revenues last quarter from iTunes.  In those 10 years they were making 35% margins on every iPod and iOS device.  On top of that the UI was just amazing and word of mouth did wonders for sales of those devices.

    The kindle fire and nook will take away market share from iTunes the way Apple takes market share from Windows.  It will take about 30 years of this strategy to really make a dent in Apple’s iPad market. The problem is that neither company can afford more then 3 quarters of losses from their tablets no matter how much content they sell.  Apple can withstand this assault with out introducing 7” tablets or lower their prices.

    This is Android all over again.  Everyone is happy with cheaper Android phones and great market share gains but those building the phones keep losing money.  That strategy will work for strong companies that can keep up with innovation and over time pull together a profit making products. Samnsung and HTC come do mind but they too are seeing the writing on the wall with Android.  HP could not do it even for one quarter and Motorola was bought out in desperation by Google.

    The strategy looks good on paper and it is a hail mary that will never get out of the hands of the quarterback as he fumbles the snap and Apple takes over for yet another touchdown.

    Watching the train wreck is too much fun.

    [ Edited: 26 November 2011 03:23 PM by omacvi ]      
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    Posted: 26 November 2011 03:20 PM #4

    ChasMac77 - 26 November 2011 02:56 PM

    Read some customer reviews - not good

    On top of that, some people believe that Amazon is deleting negative reviews.

    I think millions will buy the Fire without ever playing with it.  Half will love theirs and the other half will be disappointed, but too late to get their money back.  The other half will grin and bear the bugs and when they wait for a faster better version, they will also be disappointed when non comes out after waiting two years.

         
  • Posted: 26 November 2011 03:29 PM #5

    Interesting review by PurpleApple.  It’s probably the most favorable review I’ve read yet about the Kindle Fire. 

    I won’t buy it, as I can’t see any reason to own it.  The HP TouchPad that I bought earlier has to be better than the Fire and the TouchPad is going to be given away. 

    For price-sensitive buyers—and there are many—I suppose there will be a market for it, albeit limited.  Jeff Bezos is like Microsoft in one respect - he has no taste either when it comes to hardware   LOL

         
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    Posted: 26 November 2011 07:25 PM #6

    omacvi - 26 November 2011 07:20 PM
    ChasMac77 - 26 November 2011 02:56 PM

    Read some customer reviews - not good

    On top of that, some people believe that Amazon is deleting negative reviews.

    I think millions will buy the Fire without ever playing with it.  Half will love theirs and the other half will be disappointed, but too late to get their money back.  The other half will grin and bear the bugs and when they wait for a faster better version, they will also be disappointed when non comes out after waiting two years.

    I love how it automatically put whatever you surfed to in your Carousel (with large icons). There’s no way to delete those. So you porn surfers, stay away from the Fire lest Grandma see that you into (insert your favorite perversion) while demoing it at Christmas!

    Some absolute nightmares with customer service. People would nail Apple to a cross if they were treated like this.

    Really, read the reviews. Possible 25-30% returns. In some ways these things are good. Whatever initial sales are lost, some future ones are gained because people realize they want something better.

    [ Edited: 26 November 2011 09:34 PM by ChasMac77 ]      
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    Posted: 26 November 2011 09:04 PM #7

    ChasMac77 - 26 November 2011 11:25 PM

    Really, read the reviews. Possible 25-30% returns. In some ways these things are good. Whatever initial sales are lost, some future ones are gained because people realize they want something better.

    Which is EXACTLY the number I predicted on the very first day they were available for delivery.

    This will be/is, a total DISASTER scenario.

    Just imagine the headlines EVERYWHERE if Apple produced such a sub-standard product with all those glitches, errors, fails to operate, and such disappointing results versus the massive HYPE given pre-availablity!

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    Posted: 26 November 2011 09:50 PM #8

    I am not sure that would be a disaster.  Millions are happy with inferior products such as Android phones.

    I think Amazon will be happy to only see 25% return.  Apple would have 10% returns if they did not implement strict production control.  My cousin said they throw away at least 10% off the assembly line along with millions in bad chips and other parts.

         
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    Posted: 26 November 2011 10:09 PM #9

    omacvi - 27 November 2011 01:50 AM

    I am not sure that would be a disaster.  Millions are happy with inferior products such as Android phones.

    For AMZN, not the end users….

    I think Amazon will be happy to only see 25% return.  Apple would have 10% returns if they did not implement strict production control.  My cousin said they throw away at least 10% off the assembly line along with millions in bad chips and other parts.

    How?

    Amazon loses $50/machine sold. All the build estimates OMIT, royalties, patents, marketing, shipping, R&D, etc etc.

    Secondly, Amazon works on an overall margin of 4% in everything, and 25% on digital products, maybe LESS, since we don’t know the “deals” they were forced to make with the Hollyweird Studio’s for content.

    So, starting off with a LOSS of $50, it would take first years purchases of products, media, etc of about $333 just to BREAK EVEN. Given that the REASON people might chose a FIRE over an iPad is PRICE ALONE, you have identified a user base that is price aware and sensitive. By definition, they tend to be cheapskates or very very purchase adverse, unless it is a screaming “deal.”

    Not to mention, that in order to acutally USE the FIRE, you have to be a PRIME customer at $79/year, as a long time AMZN investor, I can tell you that they LOSE money on every one of those accounts, last year PRIME brought in $500 million, and COST $900 million to ship and service.

    So, add it all up.

    1: Lose money on every unit sold.

    2: Eat the losses on returns of a sub-standard product.

    3: Hope against hope, that a CHEAP-O market segment will suddenly turn voracious consumers.

    All the while APPL makes 25-30% on every unit sold, and MAKES money on accessories, iTunes, and to top it all off, can run AMZN software on it to boot!

    Tell me again about the “marketing genius” behind the current FIRE setup again?

    [ PS - I shorted AMZN when it shipped, made 87% in three days, WOULD HAVE made 32% more as of Friday. Plan on re-shorting it again, via PUTS as I did before…]

    [ Edited: 27 November 2011 09:34 AM by TanToday ]

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  • Posted: 27 November 2011 03:56 PM #10

    Do you think people are holding off buying an IPad2 because the IPad3 is expected next spring (similar to this last quarter with IPhone 4 buyers waiting for the IPhone 5)?  I myself don?t think this is the case during the Christmas season, but could happen in 1Q12.

    I don’t think that will have a major impact. I do envision a boost in iPad 3 sales over iPad 2 as a larger portion of iPad 1 buyers will be ready to move up; however, that effect probably will be relatively modest compared to the overall upward growth trajectory of the tablet (iPad) market generally.

    I do worry a bit that we need some kind of functionality boost (e.g., alternate input method) and/or the creation of one or more killer apps to drive faster adoption of the iPad category. I believe in Tim Cook’s overall forecast for tablets to grow into a larger market than PCs, but I think we need some breakthrough innovation with the device and/or software to help us get there faster.

         
  • Posted: 27 November 2011 07:02 PM #11

    TanToday - 27 November 2011 02:09 AM
    omacvi - 27 November 2011 01:50 AM

    Not to mention, that in order to acutally USE the FIRE, you have to be a PRIME customer at $79/year, as a long time AMZN investor, I can tell you that they LOSE money on every one of those accounts, last year PRIME brought in $500 million, and COST $900 million to ship and service.

    Can you really call Prime that large of a $$ looser without knowing how many additional sales are made due to Prime??  I certainly don’t know myself but I would hope Amazon Prime created some bet PROFIT for Amazon.  If not it is obviously a very flawed business model and, I would hope, would have been dropped or modifies long ago..

         
  • Posted: 27 November 2011 11:16 PM #12

    The Kindle Fire can join the bunch of followers praying for share in the tablet market.

    I believe that the Kindle Fire will be the dominant #2 player for at least the next few months. I expect to see them hit double digit market share (roughly 10-15 percent in the total tablet market). iPad will probably experience its first meaningful drop to around 80 percent market share (from ~90 percent pre-Fire, considering only sell through). At the same time, I think iPad unit sales will be in the ballpark of 17-20MM units for the December quarter.

    We need to be careful not to underestimate the extent to which Amazon’s brand and the price of the Fire will combine to sell a bunch of them, but again I don’t really see the first Kindle Fire as a direct competitor to the iPad.

    I really wonder what Amazon can sell a more direct iPad competitor (~10-inch screen) for. That could be interesting next year. My guess is they are going to struggle with that because Apple will have much more compelling hardware and software, as well as likely much bigger scale advantages. Surely Amazon would have to charge at least $375-400 (WAG) for a 10-inch tablet, at which point it seems like most people would choose the iPad 3.

         
  • Posted: 28 November 2011 12:08 AM #13

    Contrary to what most Microsofties think, the iPad is really a PC with touch input.  I say this because it has most of the functions of a PC:  Printing, word processing, spreadsheets, internet, e-mail, calendars, and e-reading, and it now operates independently of another computer.  The Kindle will have to have all these functions to compete with the iPad.  I seriously doubt that Amazon could come close to matching the iPad price if they added all this functionality.  No other manufacturer has succeeded, although Samsung is getting close.

    BTW, I predict that Gartner will throw in the towel and count the iPad as a PC within the next year.  Their reason will be that it has all the functions of a PC and that it will be seriously impacting the PC market.  Apple will sell 60 to 100 million iPads in calendar 2012, and that can’t be ignored.  The Nook and the Kindle will not be included because they don’t have the required functionality.

    You may not believe this, but if your livelihood is tied to the PC industry you ignore it at your own peril.

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    Posted: 28 November 2011 02:50 AM #14

    adamthompson3232 - 28 November 2011 06:18 AM

    The kids have spoken - they all want iPads.

    http://www.bloomberg.com/news/2011-11-28/apple-s-digital-pacifier-ipad-has-parents-emptying-their-wallets-tech.html?cmpid=yhoo

    Unfortunately, parents think otherwise,

    For Apple, the youth market presents opportunities and challenges. While the iPad is the top-selling tablet, many parents may opt for lower-cost models if they know they?re putting them in the hands of children. Amazon?s Kindle Fire is less than half the price of the iPad.
    When asked to choose between the $199 Kindle Fire and the $499 iPad, 51 percent of consumers opted for the Amazon product, according to a survey by Parks Associates. Smith said he is considering a Kindle Fire for his family?s second tablet.

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  • Posted: 28 November 2011 10:34 AM #15

    A review I read on Macintouch.com made the point that the location of the on/off switch along the bottom edge of the Fire causes it to shut off if one rests it on ones chest or stomach while reading. This also creates a need for a unique portrait book holder with a gap where the switch is. My question (which the review didn’t make clear): can the Fire be turned upsidedown like an iPad, with the screen reorienting?