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Competition Finally in Tablet Market

Happy New Year! So, what did Santa bring you? Wait. Don't tell me. Did you get an Amazon Kindle Fire tablet? Really? I got one, too! What do you think of it?

I wouldn't be a bit surprised to hear that many of you unwrapped the new tablet from the world's largest online retailer. (I really did open up one myself a few weeks ago, but it was more a work-related purchase than a holiday-induced device-buying buzz.)

2011 is the Best Holiday Ever for Kindle” trumpeted Amazon's PR department, in a statement at the end of the year. The company said it sold “well over 1 million Kindle devices per week” in December. The Kindle Fire, Amazon said, was “the #1 best-selling, most gifted, and most wished for product across the millions of items available on Amazon.com since its introduction 13 weeks ago.”

Since Amazon hasn't divulged specific numbers, it's hard to know exactly what this all means, and even industry watchers only have their best guess to fall on right now. On one side, IHS iSuppli Display Materials & Systems Service, cited in this Digital Trends story, estimated that Amazon would ship 3.9 million Kindle Fire units in the 2011 fourth quarter. Those kinds of numbers could give Amazon a 13.8 percent share in the tablet market. Sure, that's a far cry from the 18.6 million iPad units Apple was expected to sell in the same three-month period and the 65.6 percent market share Apple commands, but it's not a bad start for a company just entering the space.

On the other side of the fence, some analysts suggest that despite the rosy sales numbers for its signature electronics products, Amazon will not hit its 40 percent sales growth projection for the fourth quarter. But if we look beyond the fourth quarter's predicted shipments and think about this in terms of what the tablet market could look like for 2012, I would say we finally are at the shakeout inflection point we've been waiting for: the point where the market shifts from reaching a few consumers to reaching the masses.

Primarily, Amazon's entry marks the first real competitor to {complink 379|Apple Inc.}, which for the last 18 months or so has dominated with its high-end iPad that has won the love of early technology adopters.

Yes, I know. I heard that, too. The Fire isn't going to be an iPad killer, and there are well-noted problems about the volume control, touch screen functionality, lack of privacy controls, etc. They're issues Amazon has said it is working on and will probably address in the next iteration, which is reported to be heading into production in the second quarter of 2012. Besides, everyone in the tech world knows round-one devices always have bugs that need fixing.

The point is that no other tablet so far has caused this much excitement in what's become a crowded market. Indeed, the lack of fanfare has made even traditional device makers like {complink 2376|Hewlett-Packard Co.} and {complink 4644|Research In Motion Ltd. (RIM)} fall way short of their goals when they launched similar offerings. (See: HP Chooses the Lesser of Two Evils and RIM’s Struggle to Succeed.)

What we are all coming to learn is that the tablet market, like the smartphone sector, depends not just on the hardware, but on the entire services ecosystem the device stands on. Amazon is one of the few companies that can feasibly go head-to-head with Apple on that front.

Second, it's the price point that's going to shift things in a big way this year. Amazon's $199 tablet –selling below the $201.70 it costs to make — is about $300 less than Apple's lowest-price iPad. Don't think Apple has let that slip pass it. DigiTimes speculated that if Apple releases two versions of its next iPad, the company might change its pricing strategy, with one device still targeting high-end buyers and the other going after the mid-range consumer.

Undoubtedly, the tablet space seems to be heading for a competitive pricing war in 2012, with ecosystems pinning up against ecosystems. Supply chain folks intuitively know that the company with the most agile and responsive ecosystem usually wins. It's hard to say which of these two titans will be the victor in the tablet niche, but it will be fun to watch.

21 comments on “Competition Finally in Tablet Market

  1. Barbara Jorgensen
    January 4, 2012

    I didn't get (or ask for a Kindle Fire) but I did buy from Amazon for Christmas. I was once again amazed at how efficient the organization is. The same goes to UPS–they delivered most of my orders this year. This is even more interesting after reading an article online about retailers that have completely blown their online strategies. Gap was one of them.

    Anyway…I'm still not a tablet convert, but I wouldn't bet against Amazon and the Fire

  2. _hm
    January 4, 2012

    People gift Amazon Kindle Fire as it was low cost. But person receving it wishes to get Apple iPAD. Eentually they will purchase iPAD.

  3. Daniel
    January 5, 2012

    “Happy New Year! So, what did Santa bring you? Wait. Don't tell me. Did you get an Amazon Kindle Fire tablet? Really? I got one, too! What do you think of it?”

    Happy New year Jennifer. So far I hadn't received my Kindle Fire tablet, please advise me how can I get it….

  4. bolaji ojo
    January 5, 2012

    Barbara, We'll have to make a (tablet) convert out of you. I am hooked, even though I don't own one. (Or do I?) You see, I got a new personal phone — the Samsung Galaxy S2. It's one of the coolest devices I've had the pleasure of playing with because it does everything I need aside from cook a 5-course meal. I have downloaded (free) books on it, do my appointments on it (separate from work related appointments, which is liberating), dictated IM on it (I speak, it types, awesome!), played Angry Birds on it (definitely addictive), surfed the web in a jiffy, asked it for the nearest restaurants during a recent trip to New York, navigated myself to places around home and well outside of my home state (the GPS is crystal clear and accurate) and even caught a member of the family (who owns an iPhone) admiring it secretly (more of this in a coming blog).

    Ok, it's not classified a tablet but it comes really close. The display is big enough and it fits into a front pocket, back pocket, side pocket or just in the palms of your hands. I may still get a tablet but I know now I don't want a laptop-screen size iPad. Which means? It may be a Kindle Fire!

  5. Anna Young
    January 5, 2012

    Happy New Year Jennifer. Amazon appear to be doing pretty well if its managed to niche 13.8 percent share of the tablet market according to your article, considering its new to this market. In comparison to Apple's ipad 18.6 million units expected sales, Apple is still proving difficult to challenge. I'm just curious as to how Amazon will bridge its profit margin. If the company is selling its device less than the cost price.

  6. Jennifer Baljko
    January 5, 2012

    Barbara – I'm with Bolaji. There's a brave new world out there worth swiping through.

    And, Bolaji – I've been wanting to hear more about the Samsung Galaxy phone. One day soon I'll be recasting my phone net… and not because I need a phone, but because I need a camera/web browser/note-taker/voice recorder in one tiny handheld.

  7. Jennifer Baljko
    January 5, 2012

    Hi Anna, Happy New Year to you too. 

    I think Amazon's idea is to make money on their services, like Prime, which allows users to access videos and lend books. But, you're right…will be interesting to see what really happens.

  8. Jennifer Baljko
    January 5, 2012

    _hm – Maybe or maybe not. I, for instance, probably won't get an iPad any time soon, not because I don't love the iPad functionality, but because it's too big for what I need a tablet for, and it's not as durable-looking as I'd like it to be. I'd feel terrible if something happened to my $500-$600 tablet, which strikes me as too fragile for my rugged, usually traveling, life. I won't feel as bad if in a year or two my $200 Fire shatters.

    Guess it depends on what the user wants to do, and what their needs are.

  9. bolaji ojo
    January 5, 2012

    Jenn, I simply don't want the iPad; it's not functional for what I need. My laptop is more useful for the kind of corporate activities I do and the smartphone backs it up. Plus, as you emphasized, the cost of the iPad is prohibitive.

  10. _hm
    January 5, 2012

    10 inch tablet form factor is perhaps the most appropriate. Steve Job did pronounced all 7 inch tablets DOA, and his prognosis is correct. Apple products are highly reliable. Try to use iPad for one month and after that use 7 inch tablet. You will realize the difference and will sure forever use iPads.

  11. Barbara Jorgensen
    January 6, 2012

    I don't want to give the impression I am anti-tablet–I'm not! I'll confess: I'm overwhelmed by choices and “flavors” available. Since tablets are such a new market, my old standby strategy of “buy a brand you know or like” isn't helping me. I need to test-drive a few more before I take the plunge.

    I'm glad you like your phone Bolaji! I'm still stuck on the small screens on most phones–I still use mine for calls and texts– but the speed and capabilities of the new phones are amazing. We used our latest upgrade to buy a new phone for my son (the screen was smashed) but maybe phones will cook or do the grocery shopping my the time my next upgrade comes along.

  12. t.alex
    January 7, 2012

    How about the latest news: India plans to sell 6 millions low cost tablets this year. It's gonna be a year of sub 100 dollar tablets.

  13. Jennifer Baljko
    January 8, 2012

    _hm – Perhaps tha's t true if you start with an iPad. But if you start with a 7-inch tablet and then go bigger, not sure the 10-inch screen would be so comfortable.

  14. Jennifer Baljko
    January 8, 2012

    Barbara – would love that too – a smartphone that cooks and does the shopping. Great ideas! Let's put a request into the likes of Apple, Samsung, Nokia =)

  15. Jennifer Baljko
    January 8, 2012

    t.alex…  a sub-$100 tablet sounds great, but what kind of capabilities will it have? Can you send a link with that news clip… would love to read more about it. thx.

     

  16. _hm
    January 8, 2012

    @Jennifer: You are correct. I just received my PlayBook, 7 inch. I find it very interesting and quite comfortable. I will be quite staisfied with it. Once one have first hand experience, they may change their view.

     

  17. jbond
    January 9, 2012

    Besides the Kindle Fire, Barnes and Noble's new Nook tablet is a great pick up for just slightly more than the Fire. Most people are finding the Nook actually rates a little better than the Fire. The Fire does have many issues that most first run electronics have, but Amazon is determined to fix these, always a good sign. There are some issues with the Nook also. Overall neither tablet will be an “Ipad” killer, but they are great tablets for less than half the price of an Ipad. Personally I prefer the Samsung Galaxy tablets to the Ipad anyways. 

  18. Barbara Jorgensen
    January 9, 2012

    It's interesting that you specifically mention the Nook. From what I have heard and read, it's a decent product. I had the mistaken impression that it was still an e-reader, but the tablet version is generally getting good buzz. I think B&N may have to untangle the Nook business from the bookstores to keep the Nook competitive, though

  19. JADEN
    January 12, 2012

    You can't compare apples to oranges, though they are both fruit but one is more juicy.  The same can be said about the Amazon Kindle fire and the Ipad, they are both tablets, ebook readers, and can run apps, watch movies and listen to music, but that is where their similarity ends.  The connectivity and the computer like aspects make Ipad popular and more aptly compare to a laptop. If you are looking for the features like an eReader or something to entertain, and not interested in the features of Ipad, then the Kindle Fire is more of a buy, being much cheap and affordable.

  20. Anne
    January 17, 2012

    I dont see Kindle Fire and Apple Ipad as competitors.  Ipad is a general purpose tablet which does just about everything, the Kindle Fire is a special purpose tablet which can do a few extra things.  The Fire is more portable, but the Ipad has a larger screen.  Apple store can't compare to Amazon's vast selections, and let's not forget the price.  The question before making the purchase is what are you using it for, Amazon doesn't tout being a business device, and if that is something you are looking for, look over to Ipad, and if you are interested in a media device that still allows you to surf the web and check mail, check out the Kindle Fire.  For about half the price, the Kindle wins.

  21. t.alex
    January 18, 2012

    Jennifer, here is one of the links i search from the internet http://www.pcworld.com/article/247375/datawind_plans_to_sell_6_million_lowcost_tablets_in_india_this_year.html I guess it should be sufficient for decent tasks.

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