Amazon.com is preparing to introduce an Android-based tablet in the fourth quarter, according to Jefferies' proprietary checks, media reports and blogs that it monitors.
The widely anticipated launch of a tablet device by Amazon in the October/November time frame should provide a boost to fourth quarter of fiscal 2012 sales and yield considerable synergies with the core marketplace and digital services overtime. This should further solidify Amazon's position as the e-commerce category leader, said Youssef Squali, an analyst at Jefferies.
According to TechCrunch, which claims to have seen and handled a test version of Amazon's Tablet, this device will be a 7-inch color touchscreen, back-lit, Wi-Fi-only device without a camera and will be marketed as a Kindle. The tablet is expected to be priced at $250 and go on sale in time for the holidays.
Checks by the Jefferies hardware team also indicate that a 10-inch, $300 version could be available in December. Squali said a proprietary tablet would let Amazon widen its competitive moat, improve consumer experience and benefit from the rapid growth in mobile usage.
Amazon had debuted an app marketplace for Android earlier this year, which should allow it to offer a rich, customized experience to its tablet users, he said.
Squali predicts Amazon's tablet will feature seamless integration with the company's e-commerce and digital services, enabling users to order goods from the Marketplace, purchase digital movies/music/e-books, etc.
Additionally, Prime could be bundled as a free one-year subscription for tablet buyers, which will not only boost the customer value proposition ($79 value plus free movie streaming service) but also help drive the core e-commerce from higher purchase frequency.
His current estimates exclude contribution from the new Kindle, which has a preliminary build estimate of 5 million for the fourth quarter, according to proprietary checks by the Jefferies hardware group.
Conservatively, a 2.5 million in unit sales in the fourth quarter and 6 million in fiscal 2012 would add $625 million and $1.65 billion in sales, or about 1,100 basis points and about 500 basis points to year-over-year growth for these periods, respectively. From a profit perspective, Squali would expect the economics of the new tablet to run at break-even for Amazon for now.