Amazon Is About to Roll out a Bunch of New Products
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Amazon (NASDAQ: AMZN) has gone from an Internet retailer to a veritable consumer electronics giant. The company is planning to refresh its lineup of Kindle Fire tablets in the next few months.
But Amazon might not stop there. If the rumors are to be believed, the company has many more devices in the works, including a smartphone, an audio streaming device, and an Apple (NASDAQ: AAPL) TV competitor.
Kindle Fire HD 2 could crush the competition
According to a BGR report, Amazon’s next generation Kindle Fire could be packing a lot of power. The device could be running Qualcomm’s high-end Snapdragon 800 processor and boast a high-definition screen.
But because it’s Amazon, the real kicker is the price. The company is said to be keeping the price points of the new Kindle Fires about the same ($200 for 7-inches, $270 for 9-inches). Buyers of the Kindle Fire HD 2, then, would be getting a tablet on par with Google’s (NASDAQ: GOOG) second generation Nexus 7, but for $30 less.
Phones and streaming devices
The Amazon smartphone rumor has been around for a while, but nothing has surfaced. Yet, as recently as May, The Wall Street Journal reported that Amazon is still working on the device.
As with other recent phones, Amazon’s handset sounds like it will be sold on a gimmick: a 3-D display. Without seeing the device, it’s difficult to judge, but other companies have tried it before. Neither LG nor HTC saw much success with their 3-D phones.
In the same report, the WSJ also said that Amazon would be launching a budget phone, as well as an audio streaming device.
Other reports have said that Amazon is developing a set-top box similar to the Roku or Google’s recently released Chromecast.
Amazon needs these devices to stay relevant
So why is an Internet retailer getting into hardware? To sell digital goods.
Over the last decade, more and more items have shifted from physical to digital. Books, movies, music, video games -- these have all gone from primarily physical goods to (increasingly) digital-only.
In that world, Amazon needs to make the hardware to sell digital goods.
For example, Amazon sells and rents digital versions of movies and TV shows. Anyone with a browser or a mobile device can get access to them, but if you use an Apple TV, you’re out of luck.
Apple TV doesn't work with Amazon’s video service; instead, Apple directs people to its iTunes.
Google does something similar. While its Chromecast can beam content from a Chrome browser, the device is optimized to work with digital content purchased on the company’s own Google Play.
Thus, Amazon needs a set-top box of its own, or it’s going to lose a lot of potential sales. The same principle applies to tablets (books) and phones (music, games).
Amazon hurts Google the most
While Amazon’s hardware competes both with Apple and Google, it’s much more detrimental to the search giant.
This is because Amazon has adopted Google’s Android operating system, but not Google Play. The Kindle Fire tablets run a forked version of Android that switches out Google Play for the Amazon App store, and Google search for Microsoft’s Bing.
Google gives Android away at no cost, instead using the mobile operating system as a way to get more people onto its web services. But by forking it, Amazon is completely eliminating any benefit Google gets from Android -- effectively piggybacking on Google’s work for free.
Despite largely catching up in terms of smartphone software, Android continues to lag Apple’s iOS when it comes to tablet-optimized apps.
I wonder if this is partially attributable to Amazon. The Kindle Fire line dominates the market for Android tablets in the US, but doesn't use Google Play, thereby heavily contributing to the fragmentation of Android. This fragmentation has long been seen as the primary factor behind Android’s app weakness (it’s easier to develop for iOS than it is for Android given that there are fewer devices and a single app store).
But Amazon wants to compete with Apple
Nevertheless, Amazon views Apple as its primary competition, offering a detailed sales page breaking down the differences between the Kindle Fire HD and the rival iPad.
But I don't think Amazon is taking many customers away from Apple. The Cupertino tech giant’s last earnings report showed a troubling drop in iPad sales, but the Kindle Fire likely had nothing to do with it.
Rather, the Kindle Fire has been jokingly dubbed the “fruitcake of tablets.” The item is highly seasonal, with Amazon selling the vast majority of its tablets right around the holidays -- people give them as gifts.
While the Kindle Fire may pack impressive specs, it suffers from a wretched operating system designed to emphasize Amazon-purchased content over raw tablet productivity. In its review last September, Engadget noted:
You can never and will never shake the feeling that this is less a tablet and more of a tool for shopping.
Unless Amazon alters its operating system significantly -- something it has little incentive to do -- the Kindle Fire should not alarm Apple shareholders.
On the other hand, while it’s easy to write off the Kindle Fire tablet, Amazon’s phone could be far more dangerous. As a company, Apple still remains dependent on the iPhone for its revenue and profit.
In the US, the iPhone has held up well against rival Android phones, maintaining a 40%+ market share despite a wave of competitors. But Amazon’s phone could be different.
Knowing Amazon, the cheap phone might be dirt cheap. And the 3-D display on the more expensive handset could be less gimmicky than it sounds.
At any rate, when Amazon rolls out its new products, Apple investors should be more concerned with Amazon’s phones than its tablets.
Waiting for September
Although it might seem like Amazon is losing its focus, it needs to invest in hardware to remain relevant in the sale of non-digital goods. With Google Play and iTunes, Google and Apple have become major digital retailers, and since they control the hardware, they can marginalize Amazon.
In the past, Amazon has used the beginning of September to unveil its new products. If that trend repeats, investors could get a look at Amazon’s new devices in just a few weeks.
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Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!