Light My Fire, Let's Go Higher
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“You know that it would be untrue,
You know that I would be a liar,
If I was to say to you, Fool,
We couldn't get much higher.”
So sang the inimitable Jim Morrison (except for the Fool part). Amazon.com (NASDAQ: AMZN) CEO Jeff Bezos may not be the stud Jim was but he does have a strategy to take Amazon higher. A little use of hyberbole, pure and simple.
By hyping the new Amazon Fire HD as, “.. simply the best tablet at any price”, he has spurred the inevitable comparisons to the Apple (NASDAQ: AAPL) iPad and he's getting people talking.
News reports have labeled reviews as "tepid" but to actually read the reviews there are things they like, although they say it's not the best tablet there is. The iPad wins that title but for the money they really like the new Fire and that has been lost in the noise.
See the following highlights.
Joanna Stern of ABC News says the 7” HD has,“substantially better specs than last year's $199 Kindle Fire and is comparable to higher end tablets.”
David Pogue of The New York Times says,”The Kindle Fire HD is not a disappointment. It's not!”
Walt Mossberg of All Things D says, “Overall, I see the 7 inch Fire HD as a good value for those primarily interested in easily tapping Amazon's large collection of content.”
Laptop Magazine says “With its superb display, superior speakers and improved performance, the $199 Kindle Fire HD is easily one of the best tablets available.”
The whole point of Bezos' braggadocio was to get media nabobs talking about the Fire and make consumers aware there is an alternative to the iPad. A point all the reviewers made was that this new Fire HD is even better than the last and it's a good buy at $199. Reviewers have to nitpick; that's their job. Price is basically not a consideration for them..the tablets are gratis to review.
Comparing the iPad to the Fire is meaningless to the consumer who can get pretty much all he needs as a casual user of the Fire. The $300 price difference -- now that is meaningful especially with gift giving season upon us. The average shopper who wants a tablet is going to see the iPad is cool and drool over it but is it cool enough to fork over an extra $300 for a gift? Now you can skype and check email and do most stuff on the Fire that you can on the Google (NASDAQ: GOOG) Nexus tablet and the Nook tablet. If you're giving a tablet to a distant relative or loved one that you want to skype, why pay up for an iPad?
Personally, those don't seem like bad or even tepid reviews. Most of the reviews have actually raved about the display, the sound and the vast improvement in viewing content. Several also commented that buyers will likely go for the Prime membership as it's value-added with access to over 5,000 movies and hundreds of thousands of books and music. Isn't that what most people use their tablet for? Even if Amazon sells boatloads of the Fires, analysts will complain that they're not making money on them. But Bezos couldn't have said it any clearer: “We want to make money when people use our devices, not when they buy our device.” Yes, it's the old razor and blade model for the digital age.
Regardless, Bezos has forced this dialogue about the new Fires. Nice reverse psychology. As they say in show biz, “Better they talk about me than ignore me.”
Bezos will probably say more on Oct. 22 when Amazon reports. Likely, they won't report sales numbers for the new Fires or the Kindles. They will certainly talk about the rest of Amazon's business that has been ignored amid all the noise between the iPhone news, a possible iPad mini, the new Fires, etc. Amazon is still the premiere e-tailer and publisher of e-books.
It's been rumored the iPad mini will be announced next month. But will it be in-stock in time for the holidays? What will it cost? How much is Apple willing to pressure its margins to compete with Amazon and Google? I still like Apple as a stock but Amazon is offering an improved portal to their content and that's exactly what Bezos has stated is his strategy. One Slate blogger's article reprinted in The Washington Post believes at some point Amazon may offer Fires at much less than cost or free with purchases of Prime or a certain amount of content.
There's a lot of moving parts to Amazon and the Fires are just one cog. Amazon has gotten people debating the merits of the Fire, raising awareness to consumers that there is an alternative to the iPad by lighting a fire under the Apple lovers.
Amazon has that outrageous P/E of 312 and value investors won't touch it. As Amazon's share price has climbed to its recent all-time highs, worrying about its high P/E has been a mistake. The share price has worked its way up from single digits to over $250. Google in its early years also had a huge P/E and you can look at articles complaining about their P/E as its share price soared.
Amazon has executed a miraculous transformation from shipping books from a single warehouse to an $112 billion market cap e-tailing giant. I think Bezos is taking it much higher.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.