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Amazon's Kindle 2: 5 burning questions

Amazon unveiled its Kindle 2 in New York Monday and the device looks impressive, but may not enough to inspire gadget lust in a down economy. Meanwhile, Amazon's press conference was a bit of a let-down since Kindle 2 is really just an iteration of the company's first e-book.
Written by Larry Dignan, Contributor

Amazon unveiled its Kindle 2 in New York Monday and the device looks impressive, but may not enough to inspire gadget lust in a down economy. Meanwhile, Amazon's press conference was a bit of a let-down since Kindle 2 is really just an iteration of the company's first e-book.

Indeed, Amazon's press conference (statement, Techmeme) was lacking a certain something--excitement. Kindle's launch was notable--the device was new, the always on wireless access was innovative and Amazon was providing its heft to the e-book market. The Kindle 2 fixes some user interface issues and synchronizes your digital library with other mobile devices, but those are evolutionary not revolutionary. 

Toss in how Stephen King (right) clearly jumped the shark with a novella (propaganda?) about a pink Kindle with special powers and I'm decidedly mixed about Kindle 2's prospects. With that in mind here are a few big questions left unanswered by Amazon.

Gallery: Amazon releases Kindle 2.0

1. Is the price too high? Amazon kept the price at $359 for the Kindle 2 and the economy is certainly in worse shape than it was when the first Kindle launched in Nov. 2007.

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Bernstein analyst Jeffrey Lindsay said in a research note that Amazon's pricing is likely to keep the Kindle a niche product. Lindsay, who reckons that Amazon sold 500,000 units and enable sales of 750,000 units in 2009. 

While the device is beloved by Wall Street analysts – especially those commuting into New York from Stamford CT at 5.00am – it is simply too expensive at $359 for the mass market. While we expect the new version to correct many of the design faults of the original Kindle, we do not expect Amazon to drop the price significantly – we expect $299 this time around and, given the current economic environment, we think this is not enough to increase sales dramatically.

2. Would Kindle be cheaper if it didn't subsidize Sprint access? Wall Street's estimates for Kindle sales are based on Sprint data. Sprint is the wireless connection that powers the Kindle. I ran into Jason Perlow and he was a bit wound up. His point: The Kindle is too expensive and if it just allowed for Wi-Fi network it would satisfy 70 percent of the audience and probably be half the price. It's a novel concept, but I have downloaded more than a few books right before the plane took off. Those impulse buys wouldn't have happened on Wi-Fi. 

Also: Time for Kindle to go open source

Kindle 3 should be an iPhone app

3. Can Amazon meet demand? Amazon has been plagued by sellouts repeatedly with the first Kindle. While it's nice that Amazon is surprised by demand it has clearly guessed wrong. Jay Marine, director of product management for the Kindle, said that Amazon "feels good about the amount of inventory we've built." Marine wouldn't discuss Amazon's supplier arrangement. 

4. Can Kindle 2 stoke demand? The latest Kindle is thinner, sleek and lighter than the first one (10.2 ounces vs. 10.3 ounces). You can also sync your Kindle library with other mobile devices, find definitions easily and use a text to voice feature (assuming you can get over the robotic tone). Amazon has a deal where if you preorder the Kindle 2 in the next 24 hours Kindle 1 users move to the front of the line. However, aside from the guys from Engadget and Crunch Gear, who were shooting pictures of the Kindle 2 like it was a supermodel, I'm not feeling the lust. I saw nothing that would make me as a Kindle 1 owner run to Amazon to order--especially if all I get is a good place in line.

Piper Jaffrey analyst Gene Munster said:

Technological improvements to the Kindle 2 ($359) announced today include a sleeker design, higher capacity, a longer battery life, and a tool that converts text to voice. We believe the new version is slightly more visually appealing, which we view as a positive development, as is the longer battery life. The increased capacity is also a positive; users can now store up to 1,500 books on the device compared to 200 previously. However, we do not believe this significantly improves the value proposition; the device competes against other devices such as smartphones, netbooks, and laptops, which offer more features at similar price points.

5. Why won't Amazon disclose Kindle sales? Marine said Amazon's policy is that the company doesn't disclose sales for an individual category. And the company is doing its best to stick with that. Amazon CEO Jeff Bezos sure didn't offer much color on unit sales. 

While those questions apply to Kindle 2, there is a never-ending debate that'll be around as long as the Kindle. Is the Kindle a computer or a book? Perlow was wound up yapping about how the Kindle should be open sourced and add more computing features. I said: "Jason it's a book." Jason: "It's a computer. It could be the computer!" That debate will continue forever, but for now Amazon seems to be content with its sole mission--sell you more books.

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