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Kindle Fire Might Ignite iPad Sales

Analysts say Amazon's lesser product could see an exodus


Amazon Kindle FireAmazon‘s (NASDAQ:AMZN) Kindle Fire is appropriately named. The device is as hot as an open flame with consumers this holiday season. The tablet PC successor to the company’s successful line of Kindle e-readers is the first tablet using Google‘s (NASDAQ:GOOG) Android operating system to capture consumer attention and dollars. Wall Street predicts the company will sell 5 million Kindle Fires by the end of the year.

Good for Amazon, but not so good for Apple (NASDAQ:AAPL), a company whose iPad has enjoyed 18 months of uncontested dominance in the tablet PC space. However, at least one research group says Apple has nothing to fear in the Kindle Fire, though — in fact, it thinks the Kindle Fire will actually spur iPad sales.

As reported Monday by PC World, JPMorgan analysts Mark Moskowitz, Anthony Luscri and Mike Kim said in a note to investors that Amazon’s early success with Kindle Fire is likely to dwindle in the coming months. The thinking is that consumers drawn in by the Kindle Fire’s $199 price tag will ultimately find the device underpowered and lacking in more complex features. “(Low-priced), reduced feature-set entrants, such as the Kindle Fire, are soap box derby devices stuck between a tablet and e-reader,” the analysts wrote. Dissatisfaction then will drive consumers to “gravitate to more feature-rich experiences” like Apple’s iPad. After meeting with Apple CEO Tim Cook, the analysts said the Cupertino, Calif.-based company is “not too concerned about the low-priced” tablet.

JPMorgan’s assessment is overly harsh, to say the least. While a segment of Kindle Fire users undoubtedly will want a more powerful and versatile computing device, many more will be satisfied with Amazon’s machine. Consider how people actually use tablets.

A Business Insider survey on how consumers use the iPad conducted during the first six months of 2011 found that just about 40% use their tablet as their primary computer, with the remaining 60% preferring desktop and laptop devices for more serious computing. Most consumers use their tablet first and foremost for web browsing (34.7% of user time on iPad), followed by communication via email and social networks like Facebook (21.7% of user time on iPad).

Considering Amazon’s Kindle Fire has a web browser and an email app and can access Facebook, it seems doubtful new purchasers will be so quick to buy another, more expensive tablet when they have one that fits their habits.

Amazon does have work to do to keep consumers happy, however. A survey conducted by usability commentator Jakob Nielsen published on Monday (via Apple Insider) found that users are unhappy with the device’s web browser. In particular, users complain that it’s difficult to enter text (i.e. when logging into Facebook, etc.) on websites because everything appears so small. Amazon can fix these problems through software updates, but it will need to act fast or risk its positive hype turning sour.

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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