New Report: Amazon's Kindle Fire Aiming for Second Place Behind iPad

Amazon's Kindle Fire is lining up for second place in tablets behind Apple's iPad, according to a new survey from ChangeWave Research.
Amazon’s Kindle Fire could become the second-ranked tablet on the market, suggests new data from ChangeWave Research, a division of analyst firm The 451 Group.

In the firm’s November survey of 3,043 North American consumers, some 2 percent claimed they’d already preordered the Kindle Fire tablet . Around 5 percent indicated it was “very likely” they would buy the tablet, and another 12 percent suggested such a purchase was “somewhat likely.”

Based on that data, the firm believes the Kindle Fire could become “the number two product on the tablet market, as long as the Kindle Fire can provide a quality user experience,” according to a Nov. 21 research note accompanying the data.

“The most immediate impact of the Amazon device is on the rest of the competition, where the survey shows it wreaking a devastating blow to a range of second-tier tablet manufacturers,” that note added, “including Motorola, RIM, Dell, HTC, H-P and Toshiba. Importantly, with the exception of the Samsung Galaxy Tab (4 percent), no other manufacturer is garnering more than 1 percent of future tablet demand among consumers.”

However, the iPad remains a formidable competitor, with ChangeWave Research recording a 74 percent satisfaction rating for Apple’s best-selling tablet. By contrast, “other tablet devices” as a lumped group drew a 49 percent satisfaction rating.

Amazon faces competition from not only the iPad and other “conventional” tablets, but also Barnes & Noble’s new Nook Tablet , which the bookseller is pushing as an e-reader and media viewer. However, the Kindle Fire is radically different from many of those marketplace rivals: in place of the others’ grid-like screens of individual applications, for instance, its user interface centers on a set of virtual “shelves” lined with the user’s media and applications. In addition, the Fire boasts a tight integration with Amazon’s online storefronts, essentially rendering it more of a vending machine for streaming media than a full-fledged tablet for both consumers and businesses.

In fact, Amazon is banking on sales of streaming media and e-books to make the Kindle Fire a profitable endeavor. According to a preliminary finding by IHS’ Teardown Analysis Service, the Kindle Fire costs $201.70 to manufacture, including materials and production. Given the Kindle Fire’s price point of $199, if IHS’ analysis holds, that means Amazon sells each unit at a slight but noticeable loss.

“Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle,” Andrew Rassweiler, senior director of IHS’ teardown services, wrote in a Nov. 18 research note.

“This is a similar business model to wireless companies such as AT&T or Verizon,” he added. “They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.”

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