Amazon Kindle Fire Supply Called Into Question
Will Amazon's Kindle Fire suffer from a supply shortage the company was infamous for during the original Kindle launch? Maybe, maybe not, but analysts have different ideas for the device's prospects.Now that the details and specifications of the Amazon Kindle Fire have been reported to death, the question turns to one of supply: Can Amazon (NASDAQ:AMZN) and its hardware supplier Quanta make enough Kindle Fires to satisfy consumer demand?
It's a fair question. When the first Amazon Kindle debuted in 2007, the e-commerce giant didn't make enough and the existing e-readers were snapped up in one week. The specter of that supply shortage cast a pall over some analysts' estimates for Kindle Fire sales this holiday season.
Noting that while Amazon should move a lot of units by selling the Kindle Fire at retail partners Best Buy, and RadioShack, as well as Amazon.com, Epps expects the company may sell 3 million units, which is the low-end of her previous model of 3 million to 5 million unit sales. She attributed this to the fact that the company isn't shipping the Kindle Fire until Nov. 15, or only 40 days before Christmas. So Munster is calling for 2.5 million Kindle Fire unit sales, while Epps is calling for 3 million. Those are liberal figures for JP Morgan's Mark Moskowitz, who remained wholly unimpressed by the Kindle Fire because he believes it pales in comparison to the more feature, rich, user friendly Apple iPad. The Kindle Fire lacks a camera and a microphone, has only 8GB of internal storage and no 3G mobile broadband access. He also said the Kindle Fire's screen is too small for content viewing compared to the 9.7-inch screen real estate of the iPads. Finally, he pointed to the slate's $199 price point as evidence of an inferior offering to the iPad. "In our view, Kindle Fire's low price point speaks to how there is much lacking in the device," he wrote in a research note Sept. 30. "At $199, we argue that the price point is not going to afford most users a tablet experience, which is a problem if Amazon wants to become a major tablet vendor. Until we see how the Kindle Fire evolves, we are comfortable stating that the emergence of a major two-tablet vendor remains elusive." Moskowitz believes the Kindle Fire is simply a stopgap, hybrid device before Amazon launches a superior, second-generation Fire with a 10-inch screen and features the first model lacks. Whether Amazon manages to sell 300,000 Kindle Fires or 3 million of the gadgets, it's selling them at a loss, according to iSuppli. The researcher said Kindle Fire parts cost $191.65, with extra manufacturing expenses pushing the total bill to $209.63. That means Amazon is losing nearly $10 on every Kindle Fire it sells on hardware alone. However, iSuppli then took into account the movies, music and application content Amazon will sell with every Kindle Fire and concluded the company could make a wee profit of $10 per device. "However, the real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content," Andrew Rassweiler, senior director & principal analyst at iSuppli. "Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon's business."