Kindle Fire or Not, Amazon’s No Better Value Than Apple

This past week, Amazon (NASDAQ: AMZN ) introduced the Kindle Fire , its $199
tablet that undercuts Apple 's (NASDAQ: AAPL ) iPad by $300. Somebody finally
is stepping up to the plate to challenge Apple's turf. The news makes for good
theater, but it really doesn't change anything. Apple will continue to sell
millions of iPads at inflated prices, and everyone else will have to make do
with lower-priced imitations. This is not a category-killer justifying
Amazon's lofty price. If I was a shareholder (and I'm not), I'd be selling
Amazon at this point and buying Apple instead. Here's why. What Has Changed?
Apple has one more competitor. So what? Trefis.com values Apple's stock at
$510 , with the iPad accounting for approximately 12%, or $56.7 billion.
Meanwhile, the iPhone accounts for 54% of its overall value. If this were a shot
across the bow of its phone business, then I'd be worried. Research In Motion
(NASDAQ: RIMM ) shipped 200,000 BlackBerry PlayBooks in the second quarter, half
as many as expected. Price cuts are under way, and with a little work, you can
get one for as little as $200. Unfortunately, for that price you get a product
with very little to offer in the way of working Android applications.
Hewlett-Packard (NYSE: HPQ ) discontinuing its TouchPad tablet certainly
hasn't helped. Versions are available for as low as $99. Besides Research in
Motion, the big losers in Amazon's move are tablet players like HTC and
Samsung (PINK: SSNLF ), Barnes & Noble (NYSE: BKS ) with its Nook color
e-reader, and Netflix (NASDAQ: NFLX ) with e-content like streaming, etc.
Counterintuitively, this might actually help Apple because if the Fire is
remotely successful, consumers will begin to see that there really are only two
players in the tablet market. State Sales Tax I have a hard time understanding
Amazon's argument that it shouldn't be required to collect state sales
taxes. Standing behind a 1992 Supreme Court ruling that prohibits states from
forcing a business to collect sales taxes when it doesn't have physical stores
there, the decision was made at a time when e-commerce wasn't nearly as
prevalent as it is today. In Canada, where there is a harmonized
federal/provincial sales tax in Ontario and three Atlantic provinces, both taxes
are collected together and remitted to the federal government. In the other
provinces and territories (with the exception of Alberta, which doesn't have a
sales tax), the provincial tax can be collected by the online retailer but
generally is left up to the customer which almost never happens because it's
impractical to enforce province-by-province. Americans might have a problem
paying taxes, but really, it's more an argument about fairness.