Amazon.com (NASDSAQ: AMZN) and its groundbreaking Kindle e-reader have been overshadowed as of late by electronics juggernaut Apple Inc. (AAPL) and the sexy new iPad. Tech sites touted an iPad frenzy in Asia as the gadget went global last week, and rumors abound that demand is so high that iPad suppliers can’t keep up.
But if you think Apple Inc. and its iPad have killed the Kindle, think again. It turns out that a recent price cut to Amazon’s entry-level e-reader has been met with tremendous success. Sales were so strong that Amazon completely sold out of its $189 model!
Here are the details: Amazon has posted a note on its website that not only says that the Kindle is temporarily out-of-stock, but that it will have to “e-mail you with an estimated delivery date as soon as we have more information.” That’s evidence of more than just a bottleneck, but a surge in demand that upset the whole supply chain and goes far beyond backorders.
While that’s bad news for folks who were hoping to free up some space in their beach bag this summer with a Kindle instead of a dozen paperbacks, it’s fantastic news for AMZN stock shareholders who have been nervous about the iPad’s impact.
There’s no doubt the Kindle is a huge reason for Amazon’s success recently. Thanks to the gadget, Amazon’s e-book sales numbers are up from this time last year by more than 200%. And in its recent earnings report AMZN boasted quarterly growth in net sales of +41%, and estimates next quarter’s growth to range between 27% and 40%!
But the real question is whether the trend will last. Apple announced it had sold 1 million iPads in less than a month after its release, and claims 1.5 million e-books downloaded from its accompanying iBookstore. The upstart iPad could very well continue to gain momentum. Apple last week said it had already sold 3.27 million iPads, so demand doesn’t appear to be waning much.
Price remains on Amazon’s side, but who knows for how long. After the launch of the iPad in April, AMZN dropped the price of the Kindle to $189 from $259. As of right now, the entry-level iPad costs $499 – with the 64GB, 3G version a lofty $829. But in recent interviews, Amazon has hinted the price cut for the Kindle was too deep – with execs saying they have “reached a tipping point with the new price of Kindle.”
Does that mean the Kindle could see a price hike? That seems unlikely in this environment. But you can bet that we haven’t heard the last on the Kindle-iPad front.
As of this writing, Jeff Reeves did not own a position in any of the stocks named here.
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