The news is out for Amazon’s (AMZN) new Kindle Fire HD, and it is already changing the landscape for tablet devices. There will be a 7-inch and an 8.9-inch variant, running on Android 4.0. The entry-level device will be released in the U.S. for $159. The 8.9 inch device will sell for $299, well below the price of Apple’s 9.7” iPad. The 8.9” model will be shipped on November 20. The 7” model will be available on September 14th.
The tablet market is already crowded, but it is still dominated by Apple’s (AAPL) iPad both by profit margin and by market share. Google (GOOG) recently released the Nexus 7 that starts at $199. Apple might alter the tablet landscape once again if it announces a rumored iPad “mini.”
Competitive Pricing by Amazon
Amazon is selling the device for $40 less than Google’s Nexus 7, once again setting the standard for low-priced tablets. The entry-level device will come with a larger battery, a new processor, and twice as much RAM as its predecessor released last year. The device will also have a resolution of 1920×1200.
Kapitallists might shun Amazon.com stock: shares traded near a 52-week high and has a POP (Price of Profit) of over 70. According to Finviz.com, Amazon is trading at a P/E of over 300. Recall that Kapitall.com uses POP as an indicator to shows you how much you are paying for $1 of a company’s expected profit over the next year. Comparing Amazon to its closest tablet competitors, we get:
1. Research In Motion Limited (RIMM, Earnings, Analysts, Financials): Designs, manufactures, and markets wireless solutions for the worldwide mobile communications market. Market cap at $3.52B, most recent closing price at $6.72.
3. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $633.94B, most recent closing price at $676.27.
Here is a chart of the three companies. Notice the rise in Amazon and Apple shares:
The above comparative valuation does not tell the whole story: Amazon is willing to operating at near-zero profit margins to gain market share. Amazon is offering a 4G LTE version of the device for $499. At a cost of $50 a year, users get 250MB of data monthly on AT&T. A data plan like that would normally cost $14.99 per month:
4. AT&T, Inc. (T, Earnings, Analysts, Financials): Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $215.99B, most recent closing price at $37.44.
Amazon aims to make little or no profit from the hardware it sells. Amazon will make money from selling content. Other companies that sell content, such as music or video, include:
6. Netflix, Inc. (NFLX, Earnings, Analysts, Financials): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap at $3.15B, most recent closing price at $56.65.
Written by Chris Lau. To get a snapshot for each company, click on the company icon. To get more detailed fundamental information on any of the companies, open the snapshot and select “number cruncher.”
The author does not hold a position in any of the companies mentioned.
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