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* What: Amazon press conference
* When: Feb. 9
* Industry watchers expect launch of new Kindle e-reader
By Alexandria Sage
SAN FRANCISCO, Feb 5 (Reuters) - A new Kindle electronic reader from Amazon.com Inc (AMZN.O) could attract more fans with design improvements and a lower price, but hype over the device may be overblown -- with mainstream popularity hardly guaranteed.
The digital book reader expected to be unveiled next week would be the second version of the device launched in November 2007 hailed as revolutionary by the Seattle-based company.
Amazon has been mum on the topic of a new Kindle, but the company has scheduled a press conference at New York’s Morgan Library for Monday, Feb. 9, which could portend news of a version two, analysts and Kindle fans said.
The Kindle helped spark consumer interest in portable readers beyond Sony Corp’s (6758.T) Sony Reader. A glowing review last fall from television host Oprah Winfrey added to the Kindle’s buzz, spurring backlogs during the holidays.
“The Kindle is huge,” said technology forecaster Paul Saffo “The Kindle is to reading is what the iPod was to music - only bigger.”
Kindle users can read books and newspapers on the wireless device that weighs less than a paperback. Amazon sells most best sellers for $9.99 and the retailer uses its close ties with publishers to make a wide array of books available. Over 200 titles, which are delivered wirelessly, can be stored on the current Kindle.
Rumors of a new Kindle reader began surfacing last fall after one blog, www.BoyGeniusReport.com, posted photos it identified as the Kindle 2 that had some design improvements and a joystick instead of a scroll wheel.
That might be welcome news for some users, who have written on blogs that “The Kindle isn’t the sexiest kid in school” and complained about the placement of its buttons, lack of backlighting, slow page turns and high price.
Others have said they would like the Kindle to be able to annotate books, and to display charts and graphs better.
The Kindle is a tiny part of Amazon’s web retail business, but it attracts a disproportionate amount of interest.
Mark Mahaney of Citigroup estimated that Amazon sold half a million Kindles last year, about a third more than the number of iPods sold by Apple Inc (AAPL.O) in its first year. Kindle revenue could surpass $1.2 billion by 2010, he estimated, or more than 4 percent of total projected revenue that year.
Others see the Kindle differently: “It’s kind of cool and it has a huge ‘gee whiz’ factor and like a lot of things Amazon does, it has a great halo affect on the stock. But that’s it,” said Bernstein Research’s Jeffrey Lindsay.
Amazon shares are down 12 pct since a year ago, compared to a 31 percent drop on the Nasdaq 100 .NDX.
No one knows how popular the Kindle is, because Amazon does not release sales data. But the device, currently priced at $359 on Amazon’s website, was out of stock most of the fourth quarter. Amazon’s Chief Executive Jeff Bezos has said he was surprised by “unusually strong demand” for the Kindle during the holidays.
Lindsay said backlogs were likely due to Amazon’s desire to control Kindle’s deployment, adding that Flextronics International Ltd(FLEX.O), which many believe manufactures the Kindle for Amazon, could produce them faster and cheaper.
Keeping the Kindle scarce keeps the level of excitement high, and keeps people talking about Amazon, Lindsay added.
Amazon’s desire to preserve its success with physical book sales is why it will not sharply lower Kindle’s price, he said.
“We think Kindle will be an interesting product which the high-end consumers love, particularly investment bankers traveling in from Connecticut,” he said. “We don’t think it will be a large penetration object any time soon.”
Consumers waiting for backordered Kindles are likely to be offered the new version by Amazon, said Stifel Nicolaus analyst Scott Devitt.
“Hopefully, they’ll have production in line,” Forrester Research analyst Patti Freeman Evans said. “It’s always difficult with the beta version of something to judge demand well.”
Some analysts think Amazon intends to make the Kindle the most sophisticated book reader on the market for a niche clientele, but that it will not try to broaden its appeal by adding major functions in the future. That would invite competition from device manufacturers, Lindsay said.
Users of Apple’s iPhone, which offers web browsing, e-mail and other downloadable applications, can already read public domain books from Google Books (GOOG.O).
“If Amazon were to take it down to $99 and try to penetrate it like an iPod, we would be the first to look at how much damage they’d do to their own business,” Lindsay said.
One area of opportunity for Kindle may be students trying to limit the textbooks they carry, said Devitt.
“Outside the heavy reader and heavy traveler (market), that is the most eye-opening opportunity they have,” Devitt said. (Reporting by Alexandria Sage; Editing by Michele Gershberg)