Amazon Reportedly Challenging Apple's iPad with Touchco Acquisition

Amazon.com has reportedly acquired Touchco, a New York-based startup that focuses on multitouch technology, in a move that if confirmed will likely affect future versions of the online retailer's Kindle e-reader.

Specifically, Touchco's technology allows for an unlimited amount of touch inputs to be made simultaneously on a screen. Sometime around the original Feb. 3 report on the acquisition by The New York Times, which quoted unnamed sources close to the deal, Touchco effectively shut down its Website.

Current versions of Amazon's popular Kindle e-reader utilize mechanical controls for navigation. Newer e-readers from competing manufacturers, many of which were on view at this January's Consumer Electronics Show in Las Vegas, utilized some sort of multitouch element. Depending on how multitouch technology from Touchco or another firm was integrated into a future version of the Kindle, it would allow Amazon to potentially leapfrog the competition.

Acquisition and technology news surrounding the Kindle is of particular note at the moment, as competition in the e-reader space continues to accelerate.

Amazon found itself in brief conflict at the end of January with Macmillan, publisher of bestsellers such as "Wolf Hall," which wanted to raise the price of e-books to take into account new devices hitting the market. In response to Macmillan's attempt to raise its e-book prices into the $12.99 to $14.99 range, Amazon pulled the publisher's titles from its online store.

"Macmillan, one of the -big six' publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switch to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases," Amazon wrote in a Jan. 31 statement. "We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles."

However, Amazon also assured its readers that the situation was temporary.

"We will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books," the retailer wrote. "Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling book."

While originally pigeonholed as a niche product by some analysts, e-readers nonetheless managed to become one of the hot holiday items of 2009, with a number of companies large and small moving into the space to compete with Amazon. Barnes & Noble announced in October that it would market its own e-reader, the Nook, which features an iPhone-like screen for navigation in addition to an e-ink display. That device also became a strong holiday seller.

According to a Feb. 3 research note from The NPD Group, e-reader satisfaction among users hovers at around 93 percent of 1,000 people surveyed by the research firm; of those, some 60 percent said that wireless access was their favorite feature, followed by 23 percent who said touch. Around 34 percent voiced a wish for color screens.

But the Jan. 27 unveiling of Apple's iPad changed the e-reader landscape, with Apple CEO Steve Jobs announcing an iBooks application and accompanying online store that would market and display e-texts for the device's 9.7-inch LED backlit multitouch screen.

"Apple finally unveiled its much-anticipated multimedia tablet iPad, along with an e-reader app called iBooks and an online e-books store," Youssef Squali, an analyst with Jefferies & Co., wrote in a Jan. 28 research note. "We believe that the iPad will slow Kindle's growth momentum but we do not see its impact on Amazon's [2010] revenues as material. There is likely a market for a dedicated e-reader but at arguably lower prices."

In preparation for its likely battle against Apple, Amazon announced an SDK (software development kit) for the Kindle that would allow developers to build active content that takes advantage of the device's 3G wireless delivery and high-resolution e-ink display. Termed the Kindle Development Kit, the platform includes sample code and a simulator for testing content on both the 6-inch Kindle and the 9.7-inch Kindle DX on a variety of operating systems, including Mac, Windows and Linux desktops.

Acquiring a touch-screen company would allow Amazon to further leverage this developer environment, but they face a potential challenge from Apple's iPhone SDK 3.2 beta, which allows developers to create applications for the iPad. Apple evidently hopes that developers will use the SDK to add to the 140,000 apps expected to be available for the iPad when it launches within two months.