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Sun 9 Oct 2011 11:25 AM

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The last battle?

The death of Steve Jobs means the Apple founder won't be around to take on perhaps the firm's toughest challenge

The last battle?
Steve Jobs, Apple CEO died of cancer last week at the age of 56
The last battle?
The last battle?

Amazon’s founder and chief executive Jeff Bezos wasn’t wearing a black turtleneck and jeans when he walked onto a hushed stage in New York last week to unveil the hotly anticipated Kindle Fire. But Bezos was certainly channeling a certain Steve Jobs look as he announced the details of the latest tablet to hit the market. Dramatic pauses, repetition of key phrases and a pitch-perfect introduction to the Fire were all reminiscent of Jobs’ unveiling of the iPad back in January 2010.

Now, of course, Jobs himself won't be around to take on perhaps the iPad's most sustained challenge. Apple has sold over 30 million iPads since its introduction, spawning a lucrative tablet market that is projected to sell more than 326.3 million units by 2015, according to technology research firm Gartner. Apple’s device currently accounts for every three out of four tablets sold worldwide but it looks like Bezos and his Kindle Fire could be about to change that.

Amazon, the largest online retailer, has seen its business thrive over the years as demand for its Kindle electronic reader and other electronics has grown. But its latest tablet, which was launched alongside three other Kindles — two of which have a touchscreen — is set to boost business even further.

“The Kindle Fire, while dilutive on a per unit basis, could help Amazon catch up to existing distributors of digital media, and may reinforce the advantage Amazon enjoys with Amazon Prime,” analysts at Stifel Nicolaus wrote in a note to clients last week.

What is so different about the Kindle Fire? Firstly, its size, the seven-inch screen is about half the size of the iPad. Secondly, its operating system is vastly different. Amazon Fire runs a version of Google’s Android software and Google is the default search engine on the tablet but unlike the iPad the Fire lacks a microphone, camera and 3G.

But most importantly for Amazon, the device links directly to its online store where users can download content that includes 100,000 movies and TV shows, a million songs, apps from the Amazon Appstore and magazines. All of the content is backed up in the cloud so it requires no additional wires for syncing and enables users to delete content as and when they want. It also comes with a one-month free subscription to Amazon Prime, which gives users access to 11,000 streaming movies and TV shows and unlimited two-day shipping on any items purchased on Amazon.

These features could see the Fire, which is due for release in the US on 15 November, become a formidable competitor to the iPad. eDataSource estimates the online retailer received around 95,000 pre-orders for Fire in the first 24 hours. While it’s not nearly as many as the 300,000 iPads Apple shifted during its first day of sale, market analysts Strategy Analytics expect Amazon will sell more than 15 million units worldwide by the end of 2013.

“Our first impression of the Amazon Kindle Fire is very positive,” Peter King, director, Tablet and Touchscreen Strategies says in its research note. “Amazon has avoided what most of the earlier iPad competitors failed to avoid; a direct comparison on size, features, price and user experience,” he adds.

Part of the appeal for consumers is of course the fact that the Kindle is significantly cheaper than its competitors. The $199 price tag is expected to attract customers in huge volumes and potentially drive down the cost of other devices. “Now the market will get more competitive,” says Vishal Tripathi, principle research analyst at Gartner.

“These are premium products at non-premium prices,” Bezos said during his introduction. “We are going to sell millions of these.”

Bezos might be planning to sell millions of Kindle Fires but his company is expected to take a financial hit in the short term as it looks to get the Fire into as many hands as possible. Market researcher IHS iSuppli estimates the Fire’s components cost $191.65 while the additional manufacturing costs bring the total cost to $209.63. Based on those estimates Amazon is set to lose just under $10 per Fire it sells.

The demand that Kindle Fire will stimulate for Amazon’s digital content in the long term, however, could be worth the financial loss in the short term, says market researcher IHS iSuppli.

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“The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content. Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business,” iSuppli said in a statement.

“No other tablet brand or e-book reader operates such a broad retail service, which generated $34bn in revenue in 2010. Conversely no other retailer can offer a tablet specifically designed to promote the sales of goods,” it added.

But not everyone agrees this will be enough to take on rival Apple. Gartner believes the iPad will reign supreme with at least a 50 percent market share until at least 2014. It is only after three years that Carolina Milanesi, Gartner vice president, sees Google’s Android gaining a more than 50 percent share over Apple.

“Unless competitors can respond with a similar approach, challenges to Apple’s position will be minimal,” Milanesi said in a September research note.

“Last Christmas there were many cheap, and in some instances below par products, but we are yet to see any polished device from a well-known brand costing under £250. In the meantime, the Apple iPad remains dominant,” adds Dominic Sunnebo, of Kantar Worldpanel Comtech.

One corner of the globe that is unlikely to benefit from the launch of the Fire is the GCC. Whilst Amazon have said it will only be available in the US for now, market commentators believe it will only be a matter of time before it goes global.  Ashish Panjabi, COO of Dubai-based electronics retailer Jacky’s, says the GCC is unlikely to be on Amazon’s radar given that the Kindle e-reader, which was first launched in 2007, has never been officially available here.

“The Kindle e-reader has never been here either officially,” he says. “If you go to Kindle Book Reader at the moment you can download books in the UAE with a UAE credit card, Amazon allows you to do that, but when it comes to downloading music from their MP3 store right now but you couldn’t download it from a UAE IP address."

While the Kindle Fire won’t be expecting to take the market by storm in the Gulf states, it certainly looks set to rival Apple in other markets.

“Amazon will finally prove to the world that size doesn’t matter but value for money does, which will be a big lesson for RIM’s Playbook and other players who have already tried to launch tablets with 7” or less,” says Informa Telecoms & Media’s David McQueen.

One issue is absolutely certain; the global tablet war is suddenly taking on a new dimension. And the world will be watching closely to see how a post-Jobs Apple copes with its first great test.

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