It's no iPad-killer; but don't underestimate the Kindle Fire

An amazing price point and simplified version of Android makes the Kindle Fire a real player in the tablet market. It's going to grow the market from the bottom with Apple continuing to own the top. I don't think it leaves room for anyone else to survive without selling at a substantial loss.

Does it hurt Apple?

Maybe a little, but it decimates the rest of the competition over the next year or so. Sure, it could panic Wall Street a bit, (just like the rumor of Apple reducing production of the iPad did). But overall this new $200 price point is going to broaden the market for tablets, which is why it won't hurt Apple too much.

For Apple to continue to own the top end, the iPad 3 needs a Retina display, faster processor and more. Apple will also have to look long and hard at profit margins and consider dropping the entry-level iPad 2 to $400 before the holidays. Apple may need to keep a version of the iPad 2 around as a low-cost option -- like it did with the $99 iPhone 3GS.

With the Kindle Fire broadening the base of the pyramid, Apple has to up the ante for all the other tablet makers so that there is literally no room for them to exist. Amazon can afford to use the Fire as a loss leader to sell content. PC and phone makers, on the other hand, will have to sell their tablets at a loss (as close as $200 as possible with comparable specs to the iPad) to gain any kind of foothold.

Of course, nobody could possibly beat HP at that game. Demand for the HP Touchpad was astounding when it hit $99. It was possibly one of the best selling tablets of all time, for a nanosecond at least. Microsoft just needs to call it quits like it did with Zune and Kin.

The story goes something like this:

- "Your toasters are fantastic and only $10 each. How do you do it?" - "We make them in China but we still lose $5 on every one we sell." - "How do you stay in business if you lose money on every one you sell?" - "Volume!"