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Kindle Fire or Not, Amazon’s No Better Value Than Apple

Sales tax issue, financials make tablet wars a moot point

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This past week, Amazon (NASDAQ:AMZN) introduced the Kindle Fire, its $199 tablet that undercuts Apple’s (NASDAQ:AAPL) iPad by $300. Somebody finally is stepping up to the plate to challenge Apple’s turf. The news makes for good theater, but it really doesn’t change anything. Apple will continue to sell millions of iPads at inflated prices, and everyone else will have to make do with lower-priced imitations. This is not a category-killer justifying Amazon’s lofty price. If I was a shareholder (and I’m not), I’d be selling Amazon at this point and buying Apple instead. Here’s why.

What Has Changed?

Apple has one more competitor. So what? values Apple’s stock at $510, with the iPad accounting for approximately 12%, or $56.7 billion. Meanwhile, the iPhone accounts for 54% of its overall value. If this were a shot across the bow of its phone business, then I’d be worried.

Research In Motion (NASDAQ:RIMM) shipped 200,000 BlackBerry PlayBooks in the second quarter, half as many as expected. Price cuts are under way, and with a little work, you can get one for as little as $200. Unfortunately, for that price you get a product with very little to offer in the way of working Android applications. Hewlett-Packard (NYSE:HPQ) discontinuing its TouchPad tablet certainly hasn’t helped. Versions are available for as low as $99.

Besides Research in Motion, the big losers in Amazon’s move are tablet players like HTC and Samsung (PINK:SSNLF), Barnes & Noble (NYSE:BKS) with its Nook color e-reader, and Netflix (NASDAQ:NFLX) with e-content like streaming, etc. Counterintuitively, this might actually help Apple because if the Fire is remotely successful, consumers will begin to see that there really are only two players in the tablet market.

State Sales Tax

I have a hard time understanding Amazon’s argument that it shouldn’t be required to collect state sales taxes. Standing behind a 1992 Supreme Court ruling that prohibits states from forcing a business to collect sales taxes when it doesn’t have physical stores there, the decision was made at a time when e-commerce wasn’t nearly as prevalent as it is today.

In Canada, where there is a harmonized federal/provincial sales tax in Ontario and three Atlantic provinces, both taxes are collected together and remitted to the federal government. In the other provinces and territories (with the exception of Alberta, which doesn’t have a sales tax), the provincial tax can be collected by the online retailer but generally is left up to the customer — which almost never happens because it’s impractical to enforce province-by-province. Americans might have a problem paying taxes, but really, it’s more an argument about fairness.

Article printed from InvestorPlace Media,

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