Amazon Looking Long in New Tablet Wars

All we know for certain is that Amazon (NASDAQ: AMZN ) is hosting a press
conference Wednesday. Its in New York and starts at 10 a.m. EDT. But in the
leaky-sieve that is the Internet, word has leaked out: Amazon is likely to
announce a major upgrade to the Kindle, an iPad-like tablet being called the
Kindle Fire. But few investors seem to be willing to buy on the rumor. On
Tuesday, a day when the Nasdaq Composite closed up 1.2%, Amazon closed down 2.5%
at $224.21. Perhaps its that investors simply dont trust the speculation on tech
blogs, which frequently contradict themselves with rumors of coming devices. Or
conversely, perhaps its the very details of that speculation, such as the
reports the Kindle Fire will be based on technology used in Research In Motions
(NASDAQ: RIMM ) Blackberry Playbook, an ill-starred tablet. Or that the Kindle
being announced on Wednesday is simply a warm-up act for a much snazzier Kindle
Fire to be revealed in early 2012. If Amazon does unveil a Kindle Fire, the
single most important data point among all the spin and pomp will be this: how
much does it cost? Reports from tech sites and securities analysts alike suggest
a price tag between $250 and $300. If thats the case, the Fire could have an
impact not only on Amazon shares, but on the stocks of other companies, too. A
$250 tablet from Amazon has a strong potential to be disruptive to the emerging
tablets market. Many consumers are intrigued by iPads, but cant bring themselves
to spend $500 or more on one. In the same way as the original Kindles $139 price
tag made the device a surprise best-seller, the Kindle Fire could bring tablets
in to many more homes. Apple (NASDAQ: AAPL ) and Amazon have radically different
approaches to tablets and content. Apple runs its iTunes online media store at a
slim profit to sell more iPhones and iPads. It costs Apple an estimated $300 or
so to sell an iPad, which it then retails for $499 or more. Apple makes hundreds
of dollars per iPad, much of which goes to the bottom line.