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Amazon: The second most desirable tablet vendor

Published Mar 5th, 2013 10:45AM EST
Amazon Kindle Tablet Analysis

Amazon (AMZN) has had a hell of a ride in the tablet market. The first Kindle tablet rode on the wave of Kindle eBook readers’ success and made a big splash. That turned into bitter backlash due to software and hardware quality problems, however. Now, Amazon has managed to stage a remarkable tablet comeback. According to a Yankee Group survey, Amazon is the second most desirable vendor among consumers planning to buy a tablet.

Apple (AAPL) continues to tower over rivals with 47% of U.S. consumers citing the brand, but Amazon is second with 7%, squeezing ahead of Samsung (005930) with 6% and Hewlett-Packard (HPQ) with 3%. No other brand got more than 2%. This is nothing short of remarkable considering how popular Samsung smartphones are and how well-positioned HP, Dell (DELL), Motorola and HTC (2498) were when they entered the tablet market a few years ago.

The jumped-up bookshop has managed to seriously challenge leading hardware companies.

The Nook’s woeful performance is basically guaranteeing that the Kindle’s tablet momentum will continue. As the eBook reader market shrinks rapidly, consumers with Nooks and Kindles that use E Ink technology will migrate rapidly to low-end tablets. Barnes & Noble (BKS) has fumbled badly and its recent announcement of scaling back its hardware development effort essentially cedes the field to Amazon. If the company’s Nook division is suffering from 12% annualized revenue decline with its old hardware R&D investment level, what results will the scaled-back effort yield?

Obviously, a 7% share of purchase intent is not a comfortable perch for Amazon in the long run; it’s just one step towards true relevance. But if the tablet market continues shifting towards the sub-$200 price bracket, Amazon is now best-positioned to benefit from the trend.

Samsung and particularly Apple would rather sell more expensive tablets and get decent operating margins and for now, Asus, Acer and other budget brands are delegated to sub-2% share purgatory. Depending on how rapidly the low-end tablet market grows, Amazon seems to have a real shot at hitting the 20% market share mark within two or three years if its software quality continues to improve. And that would give its video distribution machinery some real grist for the mill.[bgr-post-bug]

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.

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