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Tue, July 27 at 7:00PM ET

Amazon Kindle has Hot Recipe to Smoke the Apple iPad

There’s a very simple reason Samsung, Motorola (NYSE: MMI), Research in Motion (NASDAQ: RIMM), and everyone else with eyes on the tablet market haven’t made so much as a dent in Apple‘s (NASDAQ: AAPL) iPad business: Consumers don’t want tablets.

That word, no matter how much Verizon (NYSE: VZ) tosses it around in its marketing, doesn’t mean anything to the average person. People want iPads. And they want them from Apple.

There’s good data to support this. A Bernstein Research survey discussed in a recent report at All Things Digital found that 50% of respondents said they would purchase an iPad while the rest were spread across seven other manufacturers. Not only that, but fewer than 15% of respondents said they would consider a 7-inch tablet, inferring that no matter what they buy it has to at least look like the iPad. It’s the iPod market all over again, and every other tablet is Microsoft‘s (NASDAQ: MSFT) Zune.

Here’s the thing though: People want the iPad, but they also want Amazon‘s (NASDAQ: AMZN) Kindle, an e-reader. Much in the way that people want an iPad rather than a tablet, consumers also prefer Amazon’s device to other e-readers. What will happen, though, when the Kindle itself becomes a tablet? Apple may finally get a worthy challenger this fall if rumors are to be believed.

DigiTimes reported Wednesday that Amazon will deliver its very own tablet around September, just in time for the holidays. The article noted that component manufacturers working on the device have indicated that Amazon hopes to ship around 4 million Kindle tablets by December. Amazon CEO Jeff Bezos told Consumer Reports that people should “stay tuned” for news about the company’s tablet plans. Creative Strategies analyst Tim Bajarin followed this up with a PC Magazine report that Amazon would deliver two models of tablet by the holidays.

Amazon has multiple factors working in its favor against Apple. The first is the strength of the Kindle brand. When Amazon announces this new device, consumers won’t interpret this as a new tablet, but a new Kindle that can accommodate streaming video, music playback, web browsing, and all of the other multimedia functions that have made the iPad so appealing. Sweetening this deal, at least according to Bajarin’s report, is that Amazon will be undercutting Apple on price in significant ways. The company will offer a 7-inch tablet at $349, but consumer indifference to that form factor will be mitigated by the availability of a $449 10-inch model. That 10-inch model will offer the same form as the iPad for $50, a strong draw during a time when consumer spending remains weak.

Cost and brand work in Amazon’s favor, but its strongest tool is the ecosystem of entertainment services it’s grown over the past year. The Amazon CloudPlayer music service, streaming video through premium subscription service Amazon Prime, the Amazon AppStore on Google‘s (NASDAQ: GOOG) Android operating system (which the Kindle tablet is said to run on), and the Kindle digital bookstore itself are all established outlets that Amazon is already in the process of refining and growing. Other tablet makers have released their devices with a fraction of this content — that preparedness should give Amazon a fighting chance.

Come 2012, most consumers likely still won’t want tablets. It is very possible, though, that they will want both iPads and Kindles.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

Article printed from InvestorPlace Media,

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