Kindle Fire HD 8.9 vs. iPad3

Amazon built Kindle Fire HD 8.9’’ to target iPad customer segment. How do these two tablets stack up?

Specs	Kindle Fire HD 8.9	iPad 3
Display	1920x1200	2048x1536
Size	8.9 inch	9.7 inch
Weight	1.25 lb (575 g)	1.44 lb (653 g)
Storage	32 GB	32 GB
Connectivity	4G+Wi-Fi	4G+Wi-Fi
Device price	$499	$729
Data plan (per year)	$50	$230
Camera	???	5MP
Brand	Budget	Premium

Kindle is lighter by almost 0.2 pounds and smaller by almost an inch, which is an advantage in my opinion. However iPad has higher resolution and premium brand which helps resell it at higher price later. Amazon claims Kindle Wi-Fi is 40% faster. iPad camera has 5 MP and I could not find camera specs for Kindle Fire HD; suspect it has fewer megapixels. Content is comparable across.

Comparable iPad is $200+ more expensive and data plan also costs more than 4 times. Amazon Kindle Fire HD is a very decent device at more affordable price, which should make it successful.

Amazon Kindle Fire cools off?

When Kindle File went on sale about 6 months ago devices shipped totaled 4.8 million in Q4 of 2011. Analysts estimated strong sales numbers on par with Apple iPad which was also selling about 1 million devices per week and about 15 million total.

Now, number of online articles report that Kindle Fire fell off the cliff. Research firm IDC reports Amazon's share plummeted from about 17% in the fourth quarter of last year to just 4% in this year's opening quarter. IDC’s Tom Mainelli points to targeting and positioning difference of the two tablet products as a reason: "Apple's move to position the iPad as an all-purpose tablet, instead of just a content consumption device, is resonating with consumers as well as educational and commercial buyers." Bloomberg reports “Fatigue is starting to kick in about six months after a product has launched.” Apple sold 24% less iPads in the Q1, but somehow managed to increase market share to 68% from 55%.

However, this may be misleading. The main question to ask is how market share is defined here? IDC measures market share as devices gets shipped, not sold. I assume that Amazon shipped close to 5 million devices in Q4 for the holiday season and some did not sell and as demand seasonally weakened, resulting in Amazon shipping fewer devices for Q1. I assume that some devices shipped in Q4 were sold in Q1. Amazon has yet to disclose any numbers on Kindle sales. There is a definite seasonal effect in sales and shipments of the tablet devices but I have strong reasons to assume Kindle sales did not collapse as shipments indicate. If you look at comScore report showing global digital device usage (not shipments or sales), Kindle Fire commands more than half (54.4%) of Android tablet market, which trumps runner up Samsung Galaxy by more than 3 times.

How sales of Kindle Fire can further increase? There are 4 basic strategies:

1.       Increase promotion: advertising and incentives

2.       Increase channels

3.       Increase volume at the time of purchase

4.       Manage seasonal inventory 

Amazon usually does not have substantial marketing budgets and uses price as main incentive to stimulate sales. On the number two, news such as Target and some other retailers will stop selling Kindles may mean weaker devices sales. In addition, Kindle Fire today is US domestic product leaving international markets untapped. Taking Kindle Fire to the markets outside the USA can provide strong competitive response and boost sales. On the number 3 promoting a family purchase plan may increase sales. Finally, the holiday season is one of the best times to take advantage of opportunistic shoppers buying gifts.

New iPad: ultra-high resolution and 4G LTE, not smaller

Today is my birthday and Apply decided to surprise me with new iPad announcement. Two main features are:

• Higher resolution screen
• 4G LTE connectivity

New iPad also has 5 MP camera. Apple products are premium and command premium price; such feature additions do make sense. However anticipated smaller screen iPad was not announced but I do expect Apple to be working on it. Despite Tim Cook dismissal of Kindle Fire as direct competitor, Forrester reported March 4^th that Kindle Fire is taking market share from Apple iPad.

Amazon to enter iPad space?

I have written before that Apple is planning to release smaller iPad to enter Kindle Fire market segment. Article in Digitimes reports that Amazon is working with Foxconn on making 10-inch Kindle Fire that "will begin shipments in the second quarter of 2012".

Apple to enter Kindle market segment

Apple has sold 15 million iPad in the last quarter of 2011, well ahead of expected 13 million that happened Kindle Fire went on market. Kindle Fire sold between 4 and 5 million. During the earnings call Tim Cook said this concerning the rival Kindle Fire: “I looked at the data – particularly in the US – on a weekly basis after Amazon launched the Kindle Fire, and in my view there wasn’t an obvious effect on the [iPad sales] numbers”. No wonder. Products address drastically different market segments. This case is similar to MySQL and Oracle database. Users of each would never be using the other produce for obvious reasons. Jeff Bezos said when Kindle Fire went on market there are two strategies: charge more and charge less. Amazon is in the second category and both companies are successful in selling tablets. There is no need for Tim Cook to bash Kindle Fire.

On the other hand if we look at sales per week in the Q4 of 2011 Amazon and Apple has sold about the same number of devices: aprox. 1 million. That may make Apple worry. LA Times wrote that iPad market share of tablets has reduced from 64% to 57%.

There are no indicators that Amazon is trying to move to premium market segment space ($500-$800). Apple on the other hand is reported by Wall Street Journal to be building smaller iPad which will cost less and have smaller screen (the biggest cost in the device).