) announced that it will remove the built-in advertisements from
its Kindle Fire tablets if the users pay an extra fee of $15.
This advantage is not available to existing users, but only to
those going for the new Kindle Fire models. As the tablet market
has gotten increasingly crowded, Amazon is looking for ways to keep
its relatively low-end devices attractive.
For Amazon, Kindle sales are highly important, not so much
because of the hardware value, but more because of its platform
effect that facilitates the sales of a host of digital goods from
However, the strategy might backfire as some users may not want
to pay any additional fees for the tablets. Incidentally,
advertisements have helped Amazon to offer the Kindles at a lower
cost than tablets such as
) Nexus 7,
) Surface and
) iPad. Amazon is constantly evolving its Kindle Fire tablet.
Recently it launched high definition (HD) versions of Kindle at
a cheaper rate and followed it up with the option of removing
advertisements for a fee. Since these strategies are coming ahead
of the holiday season, they may be expected to help Kindle sales
However, Apple's dominant position is unlikely to be affected
just yet. The user experience and ingenuity of iPads is still
unmatched by other tablets in the market. Further, the smaller
iPads, if introduced, may give the 7-inch tablets a run for their
According to research conducted by IDC, Apple shipped 17 million
iPads in the second quarter of fiscal 2012, capturing 68.2% market
share, followed by Samsung with 9.6% and Amazon with 5.0%. Amazon's
second quarter results were more or less within expectations.
Reported revenue of $12.83 billion was down 2.7% sequentially
and up 29.5% from the year-ago quarter. This was better than the
guidance range of $11.9-13.3 billion (down 4.4% sequentially, or up
27.1% year over year at the mid-point) and in-line with consensus
expectations. Excluding an unfavorable currency impact,
year-over-year revenue growth was 32%.
Currently, Amazon has a Zacks #3 Rank, which implies a Hold
rating in the near term.
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