Tallying Up The Market Advantages Of An Amazon Tablet

Will Amazon’s (supposedly-in-the-works) tablet be the real iPad killer when it finally launches? That’s what a new research note from CLSA Asia-Pacific Markets suggests.Few will hit the mark, says CLSA analyst Avi Silver.ecent reports have even raised the possibility of two different sized Amazon tablets — a 7-inch and a 10-inch model.

Here are the five reasons Silver thinks an Amazon tablet could be particularly competitive:

• Broad user base

Through its retail operations Amazon already has 137 million user accounts. Apple, in comparison, has more than 200 million iTunes accounts.

• Comprehensive ecosystem

Amazon’s business of selling music, movies and TV shows means it boasts a “vast library of media content,” notes Silver. The company also operates a sophisticated payment system and has years of consumer insights from doing things like publishing user recommendations.

These capabilities set Amazon apart from any other device provider, including behemoths like Samsung, HP and Dell, says Silver. He also contends that content is an especially important advantage for Amazon because it is a lack of compelling media that has been the “most significant hurdle” for most non-Apple tablets.

• Affordable price

An Amazon tablet has a good chance of being affordable, says Silver. Since Amazon’s main business is e-commerce and it sells media/content, it does not need to make money on hardware, he theorizes. The Kindle supports this theory. It debuted in November 2007 at about $400 and now costs as little as $114 when packaged with ads. The device’s low price, says Silver, is believed to be below cost.

Amazon’s ability to be aggressive on price is particularly useful for tablets, which typically generate lower margins than smartphones. Silver estimates that Apple makes a gross margin of about 35% on its iPads compared to a 55% margin on its iPhones. These lower margins could be a challenge for tablet makers like Motorola and Research In Motion, who hail from the smartphone industry, Silver adds.

• Solid track record

While Amazon has never sold its own branded tablet, it has proven – with the Kindle — its ability to introduce, support and update a “homegrown” consumer electronics device, says Silver.  Though Amazon has never disclosed Kindle device sales, research firms have concluded that its probable share of the e-reader market qualifies the device as a success. IDC pegs Kindle’s 2010 market share at 48% — a figure not much smaller than Silver’s estimate (61%) of Apple’s share of the 2011 tablet market.

• Cloud capabilities

Cloud computing isn’t a major feature in today’s tablets but is believed to soon become one given Apple’s planned “iCloud” announcement next week. The service, which will be unveiled at Apple’s annual Worldwide Developers Conference (WWDC) on June 6, is anticipated to be a way to let users access their files and media from any Apple device regardless of location.

Amazon already has a cloud-based storage service called Cloud Drive and a cloud music service called Cloud Player. In addition, its Amazon Web Services (AWS) business has established it as a “cloud computing leader to businesses” over the years, notes Silver.Of course, until an Amazon tablet is actually introduced, any market assessment of one is completely speculative. But these perceived assets mean the introduction of an Amazon tablet would “significantly impact the tablet wars,” according to Silver.