Katie Marsal
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.
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Wesley Hilliard
Andrew Orr
Christine McKee
William Gallagher
Mike Wuerthele
126 Comments
Absolutely nothing to see here, people.
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.
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.
Wow! Six million KFs, each sold at a loss. Impressive.
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.