Thursday, November 03, 2011, 12:40 pm

Apple says Amazon Kindle Fire will further fragment Android

By Neil Hughes

Apple Chief Executive Tim Cook and Chief Financial Officer Peter Oppenheimer recently indicated they are not concerned by Amazon's forthcoming $199 Kindle Fire tablet, as they believe it will only serve to fragment the Google Android platform.

Ben Reitzes of Barclays Capital recently met with Cook and Oppenheimer at Apple's Cupertino, Calif. campus. Though they expectedly did not reveal anything about the company's product pipeline, they did express optimism about Apple's current market position.

In particular, they indicated they are not concerned about the Amazon Kindle Fire, a new touchscreen tablet from the online retailer that will be powered by the Android mobile operating system. The Kindle Fire will sell for $199, or less than half the $499 entry price of Apple's iPad lineup, when it launches on Nov. 15.

"While the pricing at $199 looks disruptive for what seems to be the iPad's most important rising challenge, the Amazon Fire -- it is important to note that it could fuel further fragmentation in the tablet market -- given it represents yet another platform," Reitzes wrote. "While compatible with Android, the Apps work with Amazon products.

"The more fragmentation, the better, says Apple, since that could drive more consumers to the stable Apple platform."

Apple's response to the Kindle Fire could be viewed as evidence that the company is not planning any major moves to respond to Amazon's touchscreen tablet. In October, one rumor claimed that Apple was going to counter the Kindle Fire in 2012 with a so-called "iPad mini."

Reitzes believes that Apple will eventually get more aggressive in its iPad pricing and dip below the current $499 entry-level price of the 16GB Wi-Fi-only model. But Apple won't cut the price if it ends up sacrificing the product quality and user experience.


He believes the appeal of the iPad could be extended to more PC users if Apple were to extend keyboard options with touchpads, in addition to the touchscreen interface on the iPad itself.

As for the iPhone, Reitzes believes that Apple "clearly" has room to expand its smartphone sales with new markets and pricing strategies. He said that Cook expressed excitement both about the potential for the iPhone in Asia, as well as user response to the Siri voice recognition software on the newly released iPhone 4S.

Barclays Capital has forecast Apple to sell 30.7 million iPhones in the company's December quarter, a number that Reitzes said is "conservative," considering the rapid international rollout of the new handset. Apple announced this week that Hong Kong, South Korea and 13 more countries will gain access to the iPhone 4S on Nov. 11.