The Kindle does matter to Amazon!

By: ispeculatornew
Date posted: 02.02.2010 (5:00 am) | Write a Comment  (4 Comments)

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A few days ago I wrote about the upcoming power shift from Amazon(AMZN) to Apple(AAPL) because of the launch of the much anticipated tablet, which is now known as the Ipad! I will not go too much into the device because there has already been so much written and you surely have already heard about it! The Ipad was greated with caution by many, probably because of the too high expectations.

That being said, the Itab is superior to the Kindle because of its look, its many uses and because of the power network that Apple built through its Iphone/Ipod line. In my last column I got a comment which I interpreted as meaning that the Kindle was not that important to Amazon, it was about much more than books. Yes, it is. But I did dig into the financial statements released Wednesday night when Amazon released Q4 results. The “media” division which includes (books, music and films, physical and electronic) still represents over half of the revenues of the company, I would call that signiicant.

But what struck me even more was the page of highlights that the company published. The first five points were actually about the Kindle! Still think it does not matter? Their answer to the Ipad is that “Readers deserve a dedicated device” – CFO Tom Szkutak. I’m not sure on what planet he lives but if Amazon intends to stick to a one use device, it will lose the battle. How many of you have a cell phone only for phone calls? Smartphones are part of a big tendancy that shows no signs of slowing down! So yes, the Kindle will quickly lose its huge lead to the Ipad and yes it does matter a great deal! You can read an interesting article on the Washington Post giving reasons why the Ipad will put the Kindle out of business.

That being said, Amazon has so much growth in other divisions that it is a very difficult stock to go short on! I already rolled the dice a bit going short on Baidu(BIDU) so don’t count on me to go short AMZN anytime soon! Amazon’s eletronics and other merchandise segment should take over the media division in terms of revenus in the next quarter and that has not shown signs of slowing down for now in part thanks to acquisitions such as Zappos.

Ultimate example today

Today, Amazon’s stock lost 6.6% in a day where almost everything went up. Why? Because it ended up conceeding to publisher Macmillan, who wanted to set its own prices. In the past, Amazon has had control over those prices but that is now changing. Publishers can now turn to Amazon and threaten the company to pull out its publication as those would still be available for other readers such as the Ipad. A few months ago, that situation did not exist as Amazon had power over the book publishers.

So, any thoughts on the future of Amazon? Would you be a buyer of the stock?

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  1. Comment by François — February 3, 2010 @ 4:22 pm

    3 points I would like to comment:

    1- I have to agree with the Washington Post’s article about the 10th point which is “The Apple factor”. It’s cool to have one of the Apple products: iShuffle or iPod, iMac and eventually iPad,

    2- About the product iPad vs Kindle, it depends about who you really are. If you are an eReader, better take Kindle for it’s price, in reading books, in getting books and mostly in focusing in readings!!

    3- About the future of Amazon, I am not too sure what’s their vision. I think for the moment it’s the investor perception that drives Amazon’ market price… And I’m not too sure the investors are confident for the moment… Do you agree?

  2. Comment by IS — February 4, 2010 @ 12:55 pm

    @Francois – Yes, and that is what instantly puts them in the game when launching the product… just because millions will buy it because it’s Apple. But to be a big success, I think they need for the product to be superior as well

    Actually, the Kindle is not much cheaper than the Ipad! Amazon is rumored to have purchased a company to help with its touch screen technology today… but that seems a bit late to do don’t you think?

    3-Yes, I think Amazon does have some problems if it focuses too much on the Kindle and its book value. It has so much more to offer so focusing too much on that battle could hurt badly in my opinion

  3. Comment by François — February 5, 2010 @ 10:37 am

    A controversy debate

    Not OK for price:
    – iPad costs from $499 to 829$, plus $130 extra for 3G modem and $30 a month for unlimited wireless access.
    – Kindle is $259 price tag, including an unlimited wireless plan

    OK for touch screen:
    – Great iPad’s LCD screen for video and color capabilities is AMAZING!
    – Kindle’s black and grey screen looks OLD!

    Just want to add for battery life:
    – iPad run up to ten hours between charges
    – Kindle for one week!!! But with a better screen I guess the time utilization would not be the same!

  4. Comment by IS — February 11, 2010 @ 9:33 am

    @Francois – I am becoming more and more convinced of the superior Ipad. The price is a bit more expensive but you do not NEED to have a wireless plan and if you are only using it for reading, you can easily have no plan. As for the price, it is a good point and I’m predicting that Apple will reduce its price later this year. Research showed it about about 215$ for Apple to make the Ipad so it could easily take the price down.

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