Amazon is expected to release its tablet this fall in a market dominated by Apple's iPad, which has netted a sale of 29 million units since its launch in April 2010.
Apple, based in Cupertino, Calif., refreshed the tablet as iPad 2 in March 2011, with more than 15 million iPads being sold - more than all other tablet PCs combined - since the iPad's release. In 2011, it is expected to take 83 percent of the tablet computing market share in the United States.
Competitors, right from Samsung to HP, have managed to release competing devices against iPad, but have met with little success. Though Samsung Galaxy Tab 10.1 got rave reviews, it has been blocked in several countries as Apple sued Samsung for patent infringement.
Motorola Xoom and RIM Playbook only got a lukewarm response, while HP managed to sell its TouchPads only after a $99 firesale following its decision to shutdown webOS devices.
Now enters the online retailer, Amazon, which is known for its Kindle e-book reader and aggressive pricing strategy.
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Amazon is expected to unveil its Kindle tablet in a press conference to be held in New York on Sept. 28.
Much is rumored about the features of the new Amazon tablet.
We expect a 7 tablet priced at $200 to $250 with a Nov. launch, and a 10 tablet priced at $299 with a Nov./Dec. launch. Both have very tight Amazon web services tie in, Jefferies analyst Peter Misek wrote in a recent note to clients.
Going by the analyst's expectations, Amazon may price the Kindle tablet at half the price of iPad 2, which starts from $499.
If HP's $99 firesale is any indication, then Amazon is in for a game. A survey by Citigroup showed the primary inhibiter to tablet purchases among consumers was the price, and struggling would-be iPad manufacturers, like Motorola and Research in Motion, cannot afford shrink margins to undercut the iPad.
Amazon would release a cheaper tablet that would do all the basic functions that one normally does on a tablet such as email, surfing web and watching videos. So, if Amazon's tablet manages to do well on these fronts, then it could be an excellent alternative to iPad for price-conscious consumers.
If HP TouchPad after-market and eBay sales are any indication, consumers are willing to spend $300 for a good tablet and this may be the sweet spot for non-iPad market entrants, Wedge analyst Brian Blair wrote in a recent note to clients.
On the other hand, Amazon may not fit a powerful processor or massive in-built storage that is sought by professional or business users. The tablet, which would run on Android, would be launched as a Wi-Fi device, with a 3G version following later.
But, the tablet could definitely appeal to entertainment audience as Amazon would integrate the tablet tightly with its Cloud services that would sell books, movies and music, giving a stiff competition to Apple in terms of content.
Apple has built a similar ecosystem around its mobile devices with the iTunes digital media store and the forthcoming iCloud hosted service. The selection and ease of use has proved to be a nearly insurmountable barrier for other tablets, which can just offer hardware.
A customizable tablet with access to this rich catalogue would be unique among iPad competitors, and potentially dangerous for Apple.
Given Amazon's arsenal of media content (music, streaming TV and movies), digital books, app store and distribution strength that the company's tablet offering has an opportunity to offer something competitive to the iPad, writes Blair.
Still Amazon has a long way to go to surpass iPad, which already has a head start and still going strong. In its third quarter, Apple sold 9.25 million iPads, a jump of 183 percent from last year.