Amazon "defined and dominated" low-end tablet market with 6 million Kindle Fires

Posted:
in iPad edited January 2014


While Amazon isn't selling half as many Kindle Fires as iPads, investment bank Stifel Nicolaus said Monday that first quarter shipments of the new tablet rose to 6 million, placing the Fire's ramp-up on par with that of the original iPad while carving out a strong-hold on the low end of the market this past holiday season.



Analyst Jordan Rohan dubbed it "quite impressive" that the online retailer has used its "distribution prowess to define and dominate the low end of the device ecosystem" in the face of big competition from Apple and other Android device makers.



He said that even if Amazon makes no incremental contribution on the sale of the Kindle Fire hardware, software attach rates for apps and media downloaded to the tablets would correlate inversely with the hardware price and could drive real upside in its North American media segment revenues.



"Amazon's device proliferation strategy has broader implications than most appreciate," Rohan explained in a note to clients. "Tablets including iPad and Kindle Fire are rapidly taking share from PCs and notebooks. Kindle Fire has staked out an important market position due to its loyal Amazon customer base and attractive (low) device pricing."



Amazon's estimated 6 million Kindle Fires represent just a fraction of Apple's record 111% rise to 15.3 million iPad 2 shipments during the same time period. But Rohan argues that there's strategic value in Amazon's Kindle Fire becoming the third major device ecosystem after iOS and Android -- one that will reflect in revenues and margins longer term.







Looking forward, the analyst believes the next logical move for Amazon is to equip the Kindle Fire with a video subscription service to compliment its existing on-demand pay model, and Prime Free Videos service.



Rohan's estimates aside, Amazon has never formally provided sales figures for any of its Kindle-branded hardware products outside of saying last month that it was shipping a combined 1 million units per week. While that practice is expected to remain intact, the online retailer may provide some additional color on the success of Fire when it reports fourth quarter results on Tuesday.



«134567

Comments

  • Reply 1 of 126
    Quote:

    ?estimated?



    Absolutely nothing to see here, people.
  • Reply 2 of 126
    I understand that these analysts get paid a lot of money for their reports. Maybe that's why they feel obligated to write such obfuscated language. What the heck does this mean:



    "software attach rates for apps and media downloaded to the tablets would correlate inversely with the hardware price"



    There must be a plainer way to say this.
  • Reply 3 of 126
    Defined and dominated how to sell a product at a loss. Next they will be giving books, music or movies for free to keep you from leaving.
  • Reply 4 of 126
    Wow! Six million KFs, each sold at a loss. Impressive.
  • Reply 5 of 126
    gqbgqb Posts: 1,934member
    Quote:
    Originally Posted by ddawson100 View Post


    I understand that these analysts get paid a lot of money for their reports. Maybe that's why they feel obligated to write such obfuscated language. What the heck does this mean:



    "software attach rates for apps and media downloaded to the tablets would correlate inversely with the hardware price"



    There must be a plainer way to say this.



    As hardware prices drop and more people buy them, more software and media is sold.
  • Reply 6 of 126
    saareksaarek Posts: 1,530member
    I wonder how the actual return rate faired compared to the actual sold rate.
  • Reply 7 of 126
    Quote:
    Originally Posted by ddawson100 View Post


    "software attach rates for apps and media downloaded to the tablets would correlate inversely with the hardware price"



    There must be a plainer way to say this.



    It seems like that says 'people who spend less on their tablet will generally spend more on software', but in fact, based on what we've seen to date on other devices, I expect the opposite would be the case. In any case, it is amazing how poorly some of these idiots communicate. I can picture one of them saying, to their significant other after an argument, “let’s interface over coffee tomorrow morning.”
  • Reply 8 of 126
    Give Amazon credit. They figured out the "gadget" version of the tablet. Acting superior because it isn't an iPad reminds me of my Mercedes driving friend who looks down on anything that doesn't cost as much. Bad form, and very revealing as to his priorities.
  • Reply 9 of 126
    Hmmmm... there's that word "shipped" again...
  • Reply 10 of 126
    Quote:
    Originally Posted by jhromeror View Post


    Defined and dominated how to sell a product at a loss. Next they will be giving books, music or movies for free to keep you from leaving.



    If you're an Amazon Prime member (and all Kindle Fires come with a trial), then you get a lot of free books and movies. It's a very good deal, and it absolutely does keep customers coming back and spending money on other things.



    I love my Kindle Fire and over the course of the year, I'm sure it will get Amazon a profit. The device is a loss leader, yes, but it serves as an entry point into their media ecosystem.

    Quote:
    Originally Posted by island hermit View Post


    Hmmmm... there's that word "shipped" again...



    I would be surprised if people didn't buy the vast majority of Fires directly from Amazon, so "shipped" here is probably a better estimate than most other Android tablets. (Better, mind you — not perfect.)
  • Reply 11 of 126
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by AppleInsider View Post


    While Amazon isn't selling half as many Kindle Fires as iPads, Stifel Nicolaus said Monday that first quarter shipments of the new tablet rose to 6 million, placing the Fire's ramp-up on par with that of the original iPad while carving out a strong-hold on the low end of the market this past holiday season.



    Rohan's estimates aside, Amazon has never formally provided sales figures for any of its Kindle-branded hardware products outside of saying last month that it was shipping a combined 1 million units per week. While that practice is expected to remain in tact, the online retailer may provide some additional color on the success of Fire when it reports fourth quarter results on Tuesday.



    Looks like Rohan can't read.



    Amazon said that they were shipping 1 M Kindles per week - of all types combined. The Fire was out for 6 weeks. So how in the world could anyone plausibly conclude that there were 6 million Fires sold?
  • Reply 12 of 126
    mactmact Posts: 26member
    Quote:
    Originally Posted by AppleInsider View Post




    a video subscription service to compliment its existing on-demand pay model, and Prime Free Videos service.



    .





    Uh, complement I suspect. Unless it?s just saying nice things about the other services.
  • Reply 13 of 126
    Quote:
    Originally Posted by jragosta View Post


    Looks like Rohan can't read.



    Amazon said that they were shipping 1 M Kindles per week - of all types combined. The Fire was out for 6 weeks. So how in the world could anyone plausibly conclude that there were 6 million Fires sold?



    This is exactly what I was thinking. The math just doesn't add up. But the guy is an analyst, so we must forgive him. We all know not a single one of them knows how to add.
  • Reply 14 of 126
    Quote:
    Originally Posted by island hermit View Post


    Hmmmm... there's that word "shipped" again...



    For Amazon... shipped is sold.



    I really have trouble believing this is possible. It would mean that 50% of the tablets sold in the US were Kindle Fires. I could guess that 25% is within the realm of possibility based on the few that I have seen in the wild, which should put them under 2MM units. 2MM units also seems more in line with a production ramp-up, although they could have built stock up before launch.
  • Reply 15 of 126
    Quote:
    Originally Posted by aaarrrgggh View Post


    For Amazon... shipped is sold.



    I really have trouble believing this is possible. It would mean that 50% of the tablets sold in the US were Kindle Fires. I could guess that 25% is within the realm of possibility based on the few that I have seen in the wild, which should put them under 2MM units. 2MM units also seems more in line with a production ramp-up, although they could have built stock up before launch.



    Shipped is sold?



    I'm not so sure.



    The Fire was sold by a lot of retailers. For all we know half of the Fires were shipped to retailers and half of those could still be sitting in the channel. Ask Motorola. Or Samsung.
  • Reply 16 of 126
    "defined and dominated"......... Until Apple redefines the low end by releasing a cheaper iPad 2, when the iPad 3 comes out.........
  • Reply 17 of 126
    wigginwiggin Posts: 2,265member
    Quote:
    Originally Posted by jhromeror View Post


    Defined and dominated how to sell a product at a loss. Next they will be giving books, music or movies for free to keep you from leaving.



    Quote:
    Originally Posted by RegurgitatedCoprolite View Post


    Wow! Six million KFs, each sold at a loss. Impressive.



    It worked for MS getting the xBox a foodhold in the console gaming market.



    Besides, if Amazon what's to lose money on them to the benefit of customers who maybe just want an inexpesive tablet, then we, the customer wins. If your main reason for wanting a tablet is to consume media, the Fire seems a fine option. Especially if there is a risk of theft, loss, or damage...would you prefer to risk a $200 Fire or a $500+ iPad? (Think, kids watching movies in the car, or big city public transit where thefts and "leave behinds" are common.)



    Edit: And just by way of another example... low-end ink jet printers are aften sold at/near cost and they make their money selling ink. Just like Amazon hopes to make money selling/renting content.
  • Reply 18 of 126
    adamcadamc Posts: 583member
    The horse is dumb and the mouth pice is guessing.



    Kind of wonder why they are paid to guess.
  • Reply 19 of 126
    Amazon is selling tablets to those who would not have bought an iPad [as noted by Tim Cook based on iPad sales data] that is bringing a new market segment to bear. Whether this will be a threat to Apple iPad is TBD, but to the Android tablet community its a disaster.



    Amazon is selling its curated and exclusive environment [with more to come] and they make money NOT on the hardware, but rather on the services. This makes competing very difficult for hardware manufacturers.



    So they must compete with Apple at the mid and high range [demonstrably hard to do and make money and/or volume] and at the low end with Amazon, who is selling hardware at a loss or break-even.



    Therefore, I think Apple's view that Amazon is going to make the tablet Android market very hard for non-Apple vendors and oh by the way cut Google out of the ad business, just like Facebook is doing.



    What happens when Facebook introduces a phone and tablet at near cost or even at a loss and makes money on ads and sales. Again Hardware OEMs and Google are in a tough place.



    The disruption that Amazon is pioneering may in the long run effect Apple but they will be a major problem for current Android OEMs and Google in 2012. Facebook just compounds the problem for Google and Android.
  • Reply 20 of 126
    wigginwiggin Posts: 2,265member
    Quote:
    Originally Posted by gprovida View Post


    Amazon is selling tablets to those who would not have bought an iPad [as noted by Tim Cook based on iPad sales data] that is bringing a new market segment to bear. Whether this will be a threat to Apple iPad is TBD, but to the Android tablet community its a disaster.



    Amazon is selling its curated and exclusive environment [with more to come] and they make money NOT on the hardware, but rather on the services. This makes competing very difficult for hardware manufacturers.



    So they must compete with Apple at the mid and high range [demonstrably hard to do and make money and/or volume] and at the low end with Amazon, who is selling hardware at a loss or break-even.



    Therefore, I think Apple's view that Amazon is going to make the tablet Android market very hard for non-Apple vendors and oh by the way cut Google out of the ad business, just like Facebook is doing.



    What happens when Facebook introduces a phone and tablet at near cost or even at a loss and makes money on ads and sales. Again Hardware OEMs and Google are in a tough place.



    The disruption that Amazon is pioneering may in the long run effect Apple but they will be a major problem for current Android OEMs and Google in 2012. Facebook just compounds the problem for Google and Android.



    Well said.
Sign In or Register to comment.