Kindle Fire 2: Disrupt the Nexus 7 or get out of the way

Kindle Fire 2: Disrupt the Nexus 7 or get out of the way

Summary: Amazon needs to make a big bang with its next 7-inch tablet computer or it should exit the business entirely.

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This year has been a difficult one for Amazon so far. The company reported a paltry second quarter earnings of $7 million on revenue of $12.83 billion, with a significant operating loss projected for Q3.

To make matters worse, sales of their flagship 7-inch tablet computer/ereader device, the Kindle Fire, fizzled after the first months of sales during the first quarter of 2012. 

And now Google has encroached on this territory with their $199 Nexus 7 tablet, which packs a lot more CPU, graphics and display horespower into a similar 7-inch device, and can run all -- if not more applications the Kindle Fire can, including the ability to use e-reader applications from Google, Barnes & Noble and Amazon itself.

What is Amazon going to do for a follow-up act?

Right now the current Kindle Fire is selling at $199, the same price as the base-level Nexus 7. So the first thing the company needs to do is get rid of existing inventory. Selling the current model at $149.00 or less to Primes or any other Amazon customer to prepare for the next product launch during the 2012 holiday season is probably a prudent thing to do.

The Kindle Fire needs a considerable horsepower boost in order to remain competitive. Right now, it sports a dual-core TI OMAP 4430, which is considered to be on the low end of tablet and smartphone SoCs. The next device needs a quad-core SoC with a powerful graphics processor, such as the Tegra 3 used on the Nexus 7 and other mainstream Android tablets. 

The Kindle Fire also lacks a camera for video conferencing and it's also missing Bluetooth and GPS, all three of which exist on the Nexus 7. Granted, I've found the camera and the microphone on the Nexus 7 to be completely unsatisfactory for using Skype and other VOIP/video conferencing apps, so anything Amazon can do to upstage Google and other manufacturers on this front would be well-received.

The Kindle Fire display is also outdated -- its 1024x600 pixel IPS is inferior to that of the Nexus 7, which has a 1280x800 resolution. Right now the Nexus 7 actually displays text better than the Kindle Fire on Amazon's own e-reader app, which is a bit of an embarrassment.

For consumers wanting a tablet that is also a superior e-reading experience the Nexus 7 is just a plain better device and a better value right now. If I were Amazon, I would not just match the Nexus 7 on display specs with the Kindle Fire 2, but considerably exceed it, because I expect that there is a reasonable chance that Apple is also going to enter the 7" tablet market.

If the iPad 3's display is of any indication, an "iPad Mini" would also have a very sharp, high-resolution display.

Of course, there is also the issue of content. One of the main advantages of owning an actual Amazon-branded Kindle tablet over using a Kindle app on another manufacturer's device is that you get seamless access to their content.

And perks such as the Amazon Kindle Owners Lending Library and free access to videos for Prime members are a big plus. But Amazon needs to continue to expand the library of free content for Primes if their new device is closer to a parity move rather than a considerable upgrade from a Nexus 7 or other 7" tablet. 

Of course, it begs the question if Amazon can actually up the ante on their own hardware given that they have demonstrated that all the Kindle Fire is good for at the moment is losing money. It may make more sense to cut their losses and partner with an existing hardware OEM like Samsung, much like Google has done with ASUS for the Nexus 7.

Samsung would be an ideal partner for Amazon, since they are a Tier 1 component manufacturer for SoCs and also for displays and memory. And they also produce their smartphones and tablets which could easily be "Amazonized".

Given Samsung's difficulties in trying to participate in the official Android ecosystem by playing the software update and smartphone flavor of the month game, and being thrown under the bus by Google since the company's acquistion of Motorola, the South Korean electronics giant may be receptive to a "Come to Bezos" moment.

And if a partnership with an OEM is not in the cards, Amazon may wish to consider exiting the tablet and device market entirely, and focusing on creating apps that deliver content as well as their Appstore for use on 3rd-party devices, which is a far more profitable business.

What features should Amazon concentrate on for its next Kindle Fire? Talk Back and Let Me Know.

Topics: Amazon, Android, Google, Mobile OS, Tablets

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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50 comments
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  • Or...

    Or Amazon could just produce a bona-fide Android tablet. Bake a bunch of Amazon content delivery aps into the ROM (Kindle App, Amazon MP3, Movies etc.) but team up with Google to nurture the Android ecosystem and help fend off the iPad challenge instead of framenting it with a half-baked fork of Android.

    Yeah, consumers will be able to buy their Books, music, movies and apps from Google Play with such a device, but other than the Apps, Amazon still has superior offerings in all other areas. And being able to include Google apps (Mapping, Calendar, etc.) would probably make it a very attractive tablet for a lot of consumers.

    Google took a gamble with Android in allowing the "install from other sources" option in Android. Amazon might see the wisdom in doing the same for the Fire.
    dsf3g
    • Considering iPad Mini

      Apple might go to one of three ways:
      1) not release iPad Mini, despite all speculations;
      2) release iPad Mini with 1024 x 768 screen resolution;
      3) release iPad Mini with 1600 x 1200 or more Retina screen.

      Depending on Apple's move, Kindle Fire and Nexus destinies might dramatically change.
      DDERSSS
      • You forgot price

        Will an iPad Mini sell for $299 U.S. with last year's model for $239 U.S. or will it sell for $349 U.S. with last year's model for $279 U.S.? Apple, because of their hardware margins, will not directly engage Google and Amazon in a race to the bottom. Instead, they will position the iPad Mini as a premium 7-inch form-factor tablet.

        Yes, iPad Mini will cannibalize iPad sales to an extent, as some customers will opt for a cheaper and more mobile iPad. Apple will still get their margins and make tons of money.

        And, as you implied, *if* ...
        Rabid Howler Monkey
        • Remember the Ipod Touch?

          Remember, Apple still has to consider the well-being of the iPod touch, which starts at 199 and goes to 399, making zero space for a speculated mini tablet. Apple would be forced to drop the Ipod touch price considerably to even make room for a mini tablet
          Fat Albert 1
          • Or just drop the iPod touch entirely

            Why keep the Touch around? It's just a 3.5 inch iPad.
            AnalogJoystick
          • Or Apple would have to drop the iPad 2

            I don't think Apple will drop the iPad 2 @ $399 in order to make room for an iPad mini @ $399 because it would not be perceived as a good value (since it would only have half the screen real estate).
            M Wagner
          • Apple is more likely to dump the iPod Classic than the Touch.

            The iPod Touch is effectively an iPhone without voice or 3G. The iPhone needs a larger screen and some say the iPad needs a smaller screen. Apple distributes its products across a broad range of premium price-points. They would have to restructure things quite a bit to keep a handheld device in the line-up and to introduce a mid-sized tablet. I just don't see it.
            M Wagner
          • I don't see it...

            Until you can release a reasonably priced 160Gb ipod touch, I don't see Apple dumping the Classic iPods. There are people out there with huge media collections who still need lots of storage (I've only got about 25Gb on my 5th Gen iPod Video, but I was recently stunned to discover that my 70 year old mother has nearly 40Gb of data on her 80Gb iPod classic!)
            dsf3g
      • Apple sees the writing on the wall. Android consumers are buying on price

        I don't think Apple will release a 7" iPad mini because I don't think Apple customers want one. If Apple did try this, they would have to displace the iPad 2 at $399 but I don't think it would prove to be popular - and as long as Apple can get $399 for the iPad 2 and $499 for the iPad 3, I don't see them leavings money on the table to sell a 7" tablet. Besides, Apple has more to worry about with the Microsoft Surface RT than they have to contend with to beat Android. (Which represents only a fraction of the tablet market.)
        M Wagner
        • Surface RT? Yeah, right!

          First of all, the iPad Mini will have a Retina Display and can be used as a reader. Despite what some say, the iPad 2 is a terrible reader, yet it continues to sell well for its other qualities. What I'm saying is that there's no reason to drop the iPad 2 in order to introduce the iPad Mini, which will compete with readers like the Kindle Fire and Google Nexus 7. At $299, an iPad Mini would own the 7" market. As far as the Surface RT being a player, I doubt it. I don't even think the larger Surface will sell well unless it's priced to compete with the iPad.
          Photog7
    • Kindle Fire 2

      Kindle Fire 2 Price Rumor - FREE?

      http://www.zakyri.com/2012/08/kindle-fire-2-price-rumor.html
      AnnTapia
  • Agree with many of your assessments

    Amazon has driven business to itself using Kindle. How much and if it is worth it is for Management to figure out.
    I wonder if Amazon could work with School Systems to provide Kindle like devices to schools with an infrastructure that could be deployed to provide tablets, Schoolbooks as e-books, etc.... Our school system adopted netbooks a few years ago. Not sure how well that worked. Maybe tablets could make life easier and less costly for School Systems and drive some basic business the way of Amazon. Seems like school systems need a low cost solution and to partner with a bigger company to provide volume discounts on books and other infrastructure.
    jkohut
  • Question

    What are the chances Amazon continues using Android 2.3 instead of 4.x?
    Jeff Kibuule
    • It would be the...

      Same chances BN won't combat whatever Amazon does: zero

      Speaking of BN, they're literally going to come out guns blazing to try to be formidable. I'm thinking a partnership with Microsoft (kind of like how Google did with Nexus) and a retina display superior to the iPads.

      BTW, I do kind of prefer the 4:3 aspect ratio for reading books, in portrait and landscape. Its not like that format completely throws off everything, just movies.
      Fat Albert 1
  • AMAZON IS IN THE BUSINESS OF THROWING SHAREHOLDER MONEY AWAY...

    You can pass out money in the street every day, just don't expect to make a profit doing it!

    What did Amazon gain by becoming the biggest Android tablet vendor for 2-months?

    They need to get out of tablets (let alone enter the highly competitive smart phone arena).

    Everyone thinks Balmer is the worst CEO, but actually that title was earned by Bezos.

    Comparing him to Jobs, is like comparing the Nexus 7 to the iPad (any version).
    orandy
    • Seriously?

      Amazon beat Microsoft to market with AWS (PaaS), Kindle (eBook Reader) and Kindle Fire (tablet). In addition, Amazon's stock has been growing in value since 2002 and is currently selling at over twice it's value prior to the dot.com bust. Whereas Microsoft's stock has been flat-lined since the dot.com bust (good thing they have a dividend) and is currently selling at approximately 50% of their pre-dot.com bust high. Thus, since the dot.com bust, Amazon stockholders have seen significantly more appreciation than have Microsoft's shareholders.

      [Source: Yahoo! Finance at http://finance.yahoo.com]
      Rabid Howler Monkey
      • Accountable internet rhetoric?

        Good god! A post with a cited ref! I'll let you set the example. Today's IDC press release (See here: http://www.zdnet.com/ipad-led-tablet-boom-benefits-everyone-but-acer-7000002033/ and here: http://www.idc.com/getdoc.jsp?containerId=prUS23632512 ) shows a much stronger Q2 for the Fire after the "fizzle". (Mr. Perlow had good research, but bad timing.)
        I wonder about the assumptions regarding the Amazon loss in profit and its supposed Kindle product relationship. Given their range of products (i.e. http://www.amazon.com/Kraus-KBU14-30-Inch-Undermount-Stainless/dp/B003U26QZS/ref=sr_1_1?s=hi&ie=UTF8&qid=1343928022&sr=1-1 ) including access to content seamed dead tree format, and various categories of expenses for handling all that, I have to wonder at the validity of criticism. Some more source detail might help to clarify that connection.
        Btw, since you mentioned the dot.com bust, I got to thinking...Had Texaco not merged with Chevron, how do you think the 2 market caps would compare today?
        Perfidiouspeckerwood
    • Amazon is having the right strategy

      You can't make money from both hardware and content. Amazon is also a hightech online retailer and with the Fire you can buy just about anything available. I am in Singapore and Amazon deliver ebooks to my Kindle in less than 20 secs with text to speech built in. For retailed items, less than 1 week at my doorstep. Apple built nice to see and use products but not high tech. That is why they sue Samsung and some other companies. If you can't beat them, sue them ! If Apple don't innovate beyond hardware and software in the coming years, they will disappear.
      xomcx
      • So yesterday ....

        Can do the same with the Nexus 7. and a whole lot more (have both).
        Am gifting my Fire.
        rhonin
  • Its about good enough tech

    I have several Kindle Fires for my kids. The delivery system is simple children 3 - 6 use it without issue. Also no camera. Last think I want my kids to have.

    Sure they could be lighter or a little faster. Who cares they do what they do well. I think Jason misses the fact the Fire isn't per say a direct Nexus or Tab 2 competitor.
    someitguy21