Dell kills 7" Streak as Amazon's profitless Kindle Fire ravages Android tablets

Posted:
in iPad edited January 2014
Dell has thrown in the towel on its last Android-based Streak tablets in the US as new analysts step forward to note that Apple's only competition in tablets is coming from Amazon, although saying it is "needing to do so by selling at cost."



Dell introduced its Streak 5 (originally named Mini 5) as a hybrid small tablet/smartphone in May 2010, with both a 5 inch display and 3G calling features that placed it somewhere between Apple's iPod touch and iPad. It also introduced a 7 inch Streak, which has featured 4G connectivity.



Dell canceled the Streak 5 in August, and is now noting that the online sales of the Streak 7 have also been canceled.



Dell says the Streak 7 will continue to be available through some retail outlets, and continues to sell an Android-based Streak 10 in China. However, the company is recommending both Windows Phone smartphone models and talking about Microsoft's Windows 8, which is expected to support iPad-like devices sometime at the end of next year.



Apple sold more iPads in the last quarter than all the PCs Dell sold in total. While unable to deliver a credible tablet competitor to Apple's iPad using either Google's Android or Microsoft's current Windows 7, the company has had any prospects for selling smaller, low end Android devices destroyed by Amazon's entry of the $199 Kindle Fire.







Analysts see Kindle Fire erasing Android prospects



Evercore Partners analyst Robert Cihra released a note saying he expects Amazon's Kindle Fire to make up half of all Android-based tablets sold in 2012.



Cihra wrote that Amazon?s Kindle Fire "looks like the only tablet to so far mount any credible iPad challenge," while observing that it "apparently needing to do so by selling at cost."



He added, "Amazon?s success may just vaporize other ?for profit? Android tablet OEM roadmaps," after noting that his firm sees "Apple maintaining its competitive lead," writing, "meanwhile Apple goes on as the only vendor able to cream off the most profitable segment of each market it targets, whether tablet, smartphone or PC.?



Amazon's efforts to sell the low cost Kindle Fire running a custom version of last year's Android 2.3 threatens to completely derail Google's intentions to mount this year's Android 3.0 Honeycomb and Android 4.0 Ice Cream Sandwich as a driving force behind profitable iPad competitors.



Amazon seeks to skirt Jobs' tweener tablet curse



Last October, Apple's then chief executive Steve Jobs predicted that competitors' existing 5 to 7 inch tablets wouldn't ofter enough in functionality to compel smartphone users to carry a second device, while also failing to act as differentiated tablets large enough to run the type of sophisticated apps the iPad could.



Jobs called mini tablets "dead on arrival," and predicted that "manufacturers will realize they're too small and abandon them next year. They'll then increase the size, abandoning the customers and developers who bought into the smaller format."



Amazon hopes to skirt Jobs' dire prediction for 7 inch "tweener" tablets by selling the Kindle Fire as a essentially a big iPod touch, aimed at watching movies, reading ebooks and browsing the web, rather than a fully functional tablet. Amazon has also given up on actually making any hardware profits on its efforts to distribute the Kindle Fire, hoping that its software, media, and cloud service sales will cover its hardware losses.



Apple executives have regularly stated that they intend to run their own iTunes Store and its App Store at "a bit over" break even, and have since released iCloud as a free service, pitting Amazon in a challenge to see which business model works best for sustainable profits, the platform and for users.
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Comments

  • Reply 1 of 56
    solipsismxsolipsismx Posts: 19,566member
    1) They still have the 10" Streak. You can read the review over at StreakSmart (yeah, that's the website's name).





    2) The Kindle Fire may be able to put itself into a profitable sapce with economics of scale. All these devices are risk but this is the first non-iPad tablet that seems to be carving out a sizable unit share niche. If they can get the OS updated in a reasonable time and with a reasonable amount of usablity enhancements I think the Fire has a chance of being the most popular $200 class notebook on the market, though this will end up hurting all the standard Android-based solutions that try to enter the market… but that doesn't concern me
  • Reply 2 of 56
    Update: The great race for 2nd place in the tablet space continues unabated at a furious pace with iPad remaining, the reigning Ace. All other CEO's should exit the race and save face, with grace, before your shareholders have you replaced, for entering said race and finishing last place.
  • Reply 3 of 56
    axualaxual Posts: 244member
    May I be the first to say that Dell (like HP) is in trouble.
  • Reply 4 of 56
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by axual View Post


    May I be the first to say that Dell (like HP) is in trouble.



    And RiM, and Moto. HTC seems to be pulling back up and Samsung is doing well as usual.
  • Reply 5 of 56
    You mean below cost. Yes, Amazon is selling tablets, but it's taking a loss on every single one. Even if they think they'll make it up with digital purchases, not every customer is going to jump on board. Sure, they'll make a profit in the long term, but it won't be anything substantial. Not that we'll ever know, because Amazon never supplies hard numbers...
  • Reply 6 of 56
    MacProMacPro Posts: 18,309member
    Quote:
    Originally Posted by axual View Post


    May I be the first to say that Dell (like HP) is in trouble.



    Well we all know the advice Michael should take ...
  • Reply 7 of 56
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by Peleas View Post


    You mean below cost. Yes, Amazon is selling tablets, but it's taking a loss on every single one. Even if they think they'll make it up with digital purchases, not every customer is going to jump on board. Sure, they'll make a profit in the long term, but it won't be anything substantial. Not that we'll ever know, because Amazon never supplies hard numbers...



    I think in the longterm securing their position now is a smart move. They didn't try to outdo the iPad or release it on the heals of the iPad the way Palm foolishly released the Palm Pre right before the iPhone.



    I think they'll have to move fast on the OS updates and I think a larger, more full featured tablet would be a way to move on in the future once they feel they will be able to get the number right. As it stands now Asus is releasing great HW running Android 3.x that will run 4.x at $100 below the iPad for the same capacity and display size/type. There battery is good (great for an Android-based product) and their display is great all around.
  • Reply 8 of 56
    Quote:
    Originally Posted by digitalclips View Post


    Well we all know the advice Michael should take ...



    Buy WebOS, shut it down, and give the money back to the shareholders?
  • Reply 9 of 56
    Where's the fire sales? I got the HP tablet. Its great just for reading news and rumors, while lying on the couch.
  • Reply 9 of 56
    bagmanbagman Posts: 349member
    Quote:
    Originally Posted by axual View Post


    May I be the first to say that Dell (like HP) is in trouble.



    NO - you may not, and due diligence would have told you so.
  • Reply 11 of 56
    daharderdaharder Posts: 1,580member
    The best that can be said of the Dell Streak is... Good Bye and Good Riddance!



    The Kindle Fire, on the other hand, is a brilliant entry-level tablet offering, and Amazon'll likely more than make up for any costs lost in content sales.
  • Reply 12 of 56
    bagmanbagman Posts: 349member
    Quote:
    Originally Posted by lightstriker View Post


    Where's the fire sales? I got the HP tablet. Its great just for reading news and rumors, while lying on the couch.



    Trouble with firesales (eg HP), is that you can sell it at a loss, but you can't make it up in ancillary sales, as Amazon is doing with the Kindle Fire - which they so much as admit they are selling at a loss. Better to give them away to disadvantaged folks to give them a gateway to the internet, and at least salvage some goodwill from a disastrous business venture.



    And, after all, the form factor is much too big for my stocking, as Steve would have predicted ("Tweeners need not apply for stocking-stuffer-status").
  • Reply 13 of 56
    nagrommenagromme Posts: 2,834member
    It?s not that the Fire has no profit for Amazon.



    It?s that it has no MORE profit for Amazon than an iPad running the Kindle app And Amazon is A-OK with that, I suspect.
  • Reply 14 of 56
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by nagromme View Post


    It?s not that the Fire has no profit for Amazon.



    It?s that it has no MORE profit for Amazon than an iPad running the Kindle app And Amazon is A-OK with that, I suspect.



    At this point I don't think it does if those per unit estimates on cost are even in the ballpark. They dropped their profits by 74% last quarter leaving them with only $10M for the quarter. 6 months from now that could be a different story, and that is about the time we'll know if the Fire is sustainable or just another flash in the pan.
  • Reply 15 of 56
    jd_in_sbjd_in_sb Posts: 1,484member
    How can Dell kill something that was already dead?
  • Reply 16 of 56
    slapppyslapppy Posts: 331member
    DELL can't compete with companies that sell hardware at a loss. If they had supplemental revenue to feed that freebee, then DELL can do the same as to what Amazon is doing. Selling a hobbled barely there product at a loss to make sure buyers use the device for easy Amazon store purchasing.
  • Reply 17 of 56
    aaarrrggghaaarrrgggh Posts: 1,580member
    Quote:
    Originally Posted by SolipsismX View Post


    At this point I don't think it does if those per unit estimates on cost are even in the ballpark. They dropped their profits by 74% last quarter leaving them with only $10M for the quarter. 6 months from now that could be a different story, and that is about the time we'll know if the Fire is sustainable or just another flash in the pan.



    For the investment to make sense, they are going to need each Fire customer to purchase ~$600 worth of products from them over the next ~2 years (at 30% average margin). While I will admit to spending more than that with them this year, the Fire actually made me re-think my desire to support Amazon. I'm not sure they won't burn some bridges with the Fire (heh), and wind up getting themselves locked out of future markets.



    Happy to no longer be an AMZN shareholder...
  • Reply 18 of 56
    solipsismxsolipsismx Posts: 19,566member
    I wonder how Archos is holding up with unit sales and profit?
  • Reply 19 of 56
    Quote:
    Originally Posted by SolipsismX View Post


    The Kindle Fire may be able to put itself into a profitable sapce with economics of scale. All these devices are risk but this is the first non-iPad tablet that seems to be carving out a sizable unit share niche.



    A couple of points.



    First, I'm not sure the Amazon can play the scale game in this case. I keep seeing people draw comparisons between the Kindle Fire and video game consoles which are typically sold below cost with profits coming from game sales. Console makers usually license out their development tools to people who want to develop content specifically for that console. I'm not sure that's analogous to a tablet maker trying to recoup costs by selling content that already exists in other forms and isn't specifically developed for that product and can be obtained on other platforms and in other formats. It's a subtle but important difference, and I'll be curious to see how that plays out for them.



    Secondly, it seems to me that Kindle Fire's sale numbers are being inflated a bit. People keep comparing Fire sales to iPad and other tablets, but I'm curious how much Amazon has cannibalized their own sales. You'd have to take into account all the Kindles that Amazon would have sold without the Fire before getting a real sense of how much ground the Fire is taking in the tablet market.
  • Reply 20 of 56
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by inkswamp View Post


    A couple of points.



    First, I'm not sure the Amazon can play the scale game in this case. I keep seeing people draw comparisons between the Kindle Fire and video game consoles which are typically sold below cost with profits coming from game sales. Console makers usually license out their development tools to people who want to develop content specifically for that console. I'm not sure that's analogous to a tablet maker trying to recoup costs by selling content that already exists in other forms and isn't specifically developed for that product and can be obtained on other platforms and in other formats. It's a subtle but important difference, and I'll be curious to see how that plays out for them.



    Secondly, it seems to me that Kindle Fire's sale numbers are being inflated a bit. People keep comparing Fire sales to iPad and other tablets, but I'm curious how much Amazon has cannibalized their own sales. You'd have to take into account all the Kindles that Amazon would have sold without the Fire before getting a real sense of how much ground the Fire is taking in the tablet market.



    Excellent points. Amazon is still an unknown which is why I think in 6 months we'll know for sure if their foray into the tablet market is a success or failure. There is still a lot wrong with the Fire's OS that make the user experience poor, something that even people who have free (on contract) touch-based smartphone will be able to gauge.
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