Amazon tablet seen aiming to widen e-commerce lead

SAN FRANCISCO Wed Jul 13, 2011 7:08pm EDT

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado in this July 23, 2008 file photo. REUTERS/Rick Wilking

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado in this July 23, 2008 file photo.

Credit: Reuters/Rick Wilking

SAN FRANCISCO (Reuters) - Amazon.com Inc will launch a tablet computer this year to extend its position as the world's largest Internet retailer, expand in mobile commerce and sell more digital goods, according to analysts and investors.

Amazon plans to introduce a tablet with a 9-inch screen before October that will run on Google's Android operating system, the Wall Street Journal reported on Wednesday, citing unidentified people familiar with the matter. An Amazon spokeswoman did not respond to requests for comment on Wednesday.

Analysts and investors have been expecting a tablet from Amazon for several months. The company's shares hit a record high earlier in July, partly on optimism about the new device, according to Colin Sebastian, an analyst at R.W. Baird.

"Amazon's brand, user base, and digital media offering would position a tablet well against some of the other options out there," Sebastian told Reuters. "Tablet users tend to purchase more digital items than comparable physical items, so Amazon wants more exposure to that."

Amazon shares rose 1.1 percent to close at $213.50 on Wednesday, leaving them up more than 17 percent so far this year.

At least 1.5 million Amazon-branded tablets are being built for the third quarter and the target for 2011 as a whole is 4.5 million to 5 million units, computer hardware analysts at Canaccord Genuity wrote in a recent note to investors.

The move will increase competition between Amazon and Apple Inc, which makes the top-selling iPad tablet and also sells digital books, music and video through its iTunes service.

"In the tablet market, the No. 2 player will be Amazon," Mark Gerber, director of technology research at Detwiler Fenton, told Reuters. "None of these other tablets have really taken off."

Motorola Mobility's Xoom and Research in Motion's PlayBook have struggled partly because the tablets are not clearly connected to content, Gerber explained.

In contrast, the iPad is intertwined with iTunes, where users can buy music, videos and digital books.

Amazon already has lots of content that tablet users will be able to access, including Kindle ebooks, music downloads and videos to buy, rent or stream.

Gerber said Amazon's tablet may come with free access to the company's video-on-demand streaming service for at least an introductory period.

In March, Amazon launched a Cloud Drive service that lets customers store files on its servers. In the same month, it also unveiled an Appstore for Android smartphones and tablets, getting it into the business of selling games. Both moves put it in closer competition with Apple, which offers similar services.

Gene Alvarez, who analyzes Amazon strategy at Gartner, sees the Appstore as a precursor to a tablet from the company.

In May, Reuters asked Amazon Chief Executive Jeff Bezos about a tablet. He declined to comment specifically, but suggested that there was enough room for a rival to Apple.

"It is very useful when you are thinking about how (with) any kind of new product introduction, probably the company is not hoping to completely kill any other company," Bezos said. "They are hoping they can be part of something big."

While Amazon is encroaching on Apple's turf, Alvarez and others say the online retail giant is launching a tablet for different reasons.

Apple offers content to drive sales of its gadgets, while Amazon wants a tablet to get customers to buy more of its other products.

"At the margin, maybe they can make some money selling a tablet. But Amazon is really doing it to support their core business," said Bill Smead, chief investment officer of Seattle-based investment firm Smead Capital Management. "If you sell a new bong once in a while and keep the water clean, people will keep smoking more pot."

The strategy of having a device that encourages more buying is something that Amazon has already pulled off successfully, according to Anthony DiClemente, an analyst at Barclays Capital.

Amazon announced earlier this year that it is now selling more digital books than physical books, and Barclays' DiClemente said the company's Kindle reading device was the catalyst for that shift.

Amazon's tablet has the potential to do the same for other products the company sells, he added.

"It will strengthen Amazon's strong hold on e-commerce activity and provide a way to move more into video and other digital content," the analyst said.

Gartner's Alvarez reckons Amazon is launching a tablet to tap into the growth of mobile commerce.

The total value of mobile payments may reach $670 billion by 2015, from $240 billion this year, according to a recent Juniper Research forecast.

"Mobility combined with online sales capability enables Amazon to be with the consumer at the time they want to purchase," Alvarez said. "Prior to mobile commerce, Amazon had to wait until you got in front of a computer."

(Reporting by Alistair Barr and Dhanya Skariachan; Editing by Gary Hill)

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Comments (3)
it will be $99 in 18 months… why to bother to get AT&T?

Jul 13, 2011 1:21pm EDT  --  Report as abuse
Circa1954 wrote:
Personally, I say save-up the extra $50, buy the standard Kindle, and skip the ads. Aren’t you already bombarded with enough ads nearly every waking hour? Why in the world would you opt-in to let ads creep into the time when you can escape the noise? For…$50? Perhaps if AT&T paid you $50/day but…really.

Jul 13, 2011 3:08pm EDT  --  Report as abuse
bigglybody wrote:
This sounds great and everything – and yet it just irritates me, for Amazon is by no means an internantional marketplace.

It’s got to the stage where I only bother to use Amazon for reviews, before looking elsewhere to actually buy something. The reason is because far too often I get the “Which shipping address would you like to use?” which actually means “We’re about to refuse this order when you confirm you want to send it to Malaysia”.

I have an Amazon.co.uk account as well as the .com, I’ve been one of their affiliates for over 10 years but when I try and buy something while living here in Malaysia – no.

It seems to me about the only thing I CAN buy here is books. And no, I can’t even buy the digital books for my current Android phone, so what are the odds of me being able to buy any via their own tablet? Slim to none and Slim’s out of town.

It’s actually quite infuriating, as various other sites are quite capable of only showing items available to your location (such as ebay, alibaba etc). Yet Amazon, who claim to be some big international high tech monster of a company.. can’t do that?

Instead they show me everything that I CAN’T buy, which is stupid, pointless and just annoying. So like I said, I just use them for the reviews now.

So why am I ranting so much? Because it’s also annoying to get people constantly calling this pathetic excuse of an online store “the world’s largest Internet retailer”

And?

Size isn’t everything. Until they can figure out how to sell outside of the US, UK or Germany they’ll always be a second-rate also-ran compared to truly international companies such as Apple or Dell.

Jul 14, 2011 11:48pm EDT  --  Report as abuse
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