Amazon To Sell Up To 5M Tablets

by Mark Walsh, Aug 29, 2011, 6:05 PM

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Amazon will have as many as 5 million tablet computers in the fourth quarter, posing the first credible threat to Apple's dominance of the fast-growing category since it launched the iPad last year, according to a new Forrester report.

The research firm projects Amazon will "easily" sell 3 million to 5 million units during the year-end shopping season, assuming its own tablet is priced significantly below competing models. Some sources have indicated it could sell for as low as $299 -- with enough supply to meet demand.

Apple has quickly built up a formidable lead in the nascent tablet market, selling more than 28.7 million iPads to date worldwide. Its success has attracted scores of would-be challengers, including Android-based tablets from Samsung, HTC and Motorola, as well as BlackBerry-maker Research in Motion and HP. None have done much to dent the iPad's hegemony. An April Gartner report estimated the iPad's market share at 84% in 2010.

But Forrester analyst Sarah Rotman Epps believes the forthcoming Amazon tablet -- which will also be built on Android -- will change that.

"Not only does Amazon have the potential to gain share quickly, but its willingness to sell hardware at a loss, as it did with the Kindle, makes Amazon a nasty competitor," she wrote.

The Amazon tablet could also provide a boost to Android, by encouraging developers to create more tablet-specific apps for the Google platform. Currently, more than 100,000 custom apps are available for the iPad compared to just 300 for tablets using Honeycomb, the tablet version of the Android operating system.

"If Amazon's Android-based tablet sells in the millions, Android will suddenly appear much more attractive to developers who have taken a wait-and-see approach," according to Epps. That means media companies, software developers, retailers, banks and other firms that half held off would be more willing to create content for a popular Amazon tablet.

If that turns out to be the case, it would also translate into additional tablet inventory for advertisers to exploit. Increased competition in the tablet space could also benefit both content providers and advertisers by allowing them to negotiate more favorable business terms with Apple.

In addition to challenging the iPad on pricing, other strengths of an Amazon tablet include credibility earned through the Kindle brand, a wide selection of digital content via subscription or download, and the company's huge existing e-commerce business and cloud services.

That doesn't mean there aren't obstacles for Amazon in rolling out an iPad alternative. For one, it must ensure it does not underestimate initial demand, creating a shortfall during the critical holiday buying season.

The Forrester report also points out that Amazon has no brick-and-mortar presence like Apple and Nook-maker Barnes & Noble. To date, Amazon has not demonstrated as much success as Apple in launching products internationally.

It also suggests the Google partnership could prove a drawback, including the "terrible shopping experience" of the Android Market and rules Google has set for Honeycomb that limit how much developers can modify the platform.

What's more, Apple is expected to maintain its dominant share through 2012 at least, and it's likely to take Amazon's launch of an iPad killer in stride. Still, it seems clear that Epps expects Amazon's 9-inch touchscreen tablet to overcome these stumbling blocks to become the first legitimate iPad contender.

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