Kindle Fire to burn Android Tablet Margins

Like it or not, Amazon has managed to land a winning tablet with the Kindle Fire yesterday. Technically it is not an Apple iPad killer. With 7-inch it is way smaller, it does not have a camera and the storage is also just at 8GB. In reality though you can get two Kindle Fire instead of one iPad and still have $100 to spend on movies, music and apps. The iPad is though still the gold standard for tablets and the new iOS 5 brings so many new cool features that I do not have any doubts about record iPad sales this fall. Android tablet makers will though feel the squeeze. 

Samsung and other Android tablet makers will have to reconsider their pricing strategy to continue to have a chance on gaining somewhat a significant market share. This was even clear before Amazon unveiled the Kindle. The $99 HP TouchPad fire sale already revealed that consumers prefer to pay between $200 and $250 for a tablet unless its an iPad.

Amazon did the right thing and priced the Kindle Fire below $200. Analyst Gene Munster says that Amazon is losing $50 on each Kindle Fire. It will though all come back via the purchases Kindle Fire users will make through the Amazon eco system. On top of that the Amazon Silk browser is in theory enabling Amazon to profile user web behavior in detail as pointed out by Chris Espinosa. On the other hand Amazon already knows you already very well through your purchases.

Updates

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