Just a scant few months ago, the tech world was ready to write off the entire e-reader market in the face of the Apple Inc. (NASDAQ: AAPL) iPad. But Amazon.com (NASDAQ: AMZN) and its Kindle device have proven they are here to stay.
After Father’s Day last June, Amazon slashed the prices on its second generation Kindle and the Kindle DX, bringing the base model down to $189 from $259. Analysts viewed the price cut as a desperate move to keep the e-reader market alive as long as possible. While no specific total sales numbers have been made available, the estimated ownership base for the Kindle was hovering around 3 million in June. Apple Inc.’s new tablet computer meanwhile had already sold 2 million iPads after just two months on the market. Considering that many e-reader apps are available for free on the App Store—one of which being Amazon’s Kindle App—and the growing popularity of Apple’s iBookstore, it looked like the Kindle was on its way to an early grave. Thanks to the success of two brand new models though, Amazon’s electronic book and their potential future in the portable electronics market are swinging back.
Amazon began shipping its sleek third generation devices yesterday, two days ahead of the release date announced when the company revealed the new tech at the end of July. The leap in technology isn’t as drastic as the one between the Kindle’s first and second iterations. The new Kindle sports the same 6-inch screen as its predecessor but its usability has been noticeable improved, with an upgraded 4GB memory, quicker page turns, and updated screen contrast. The most significant change to the hardware, though, is in the cheaper of the two new models. While the 3G-enabled model is still sold at $189, the new Kindle is also available in a $139 pacakage, one that only features Wi-Fi communication for accessing the Amazon Kindle Bookstore as well as basic, black and white web browsing (the web browser is still a beta edition.) While the company hasn’t revealed total pre-order and sales numbers, it is reporting that both models of the new Kindle are sold out, making them the fastest selling iteration of the device to date.
The cheap price point of the Wi-Fi model—$10 cheaper than the Barnes & Noble (NYSE: BKN) Nook, the Kindle’s closest competitor in the e-reader market—is a boon for a device that most were ready to give up for dead just a few months ago. More than anything, it brings the device closer and closer to the $99 price range Amazon needs to reach in order for the Kindle to become a common impulse buy for travelers and gift givers in the holiday season. The subtle refinements to the hardware also indicate that Amazon is hoping to keep the device present in the market in anticipation of a more dramatic hardware refresh in the future. Amazon has already begun toying with plans to broaden the Kindle’s functionality by releasing a selection of small games in the Kindle store earlier this summer. Before Apple’s tablet drowns the e-reader market, expect to see both Amazon and Barnes & Noble push to make their devices multi-functional, attractive, cheap alternatives to tablet computers.
Don’t count out the Kindle just yet, Amazon shareholders. The bookseller has just begun to fight.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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