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f it's just like Amazon selling Kindles, then it's a stupid thing to do, since Amazon already sells Kindles. Amazon also already gives away the Kindle for Android software, and the Kindle for PC software, so they have everything they need (except for the Linux client, which they arguably don't need, since the K4PC client runs under Wine) to run the Kindle software on every tablet in existence (including the iPad). The only thing Amazon seems to gain here is selling the actual hardware. If that's their plan, then the hardware better be better than anything else in existence, at a lower price point than comparable offerings. Even that doesn't guarantee they don't get their asses kicked by Apple. They're apparently entering a market with a 1600lb gorilla, and they're not it. That's not an enviable position to be in -- especially when the low end of the spectrum is already taken by capable tablets.
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I think you might be looking at things through book-centric goggles. Kindles are good for ebooks: they are not good (in fact, hopeless) at music, games, apps, movies & TV shows. Amazon sells all of these. As a retailer of those goods, Amazon is already in those markets, in competition with Apple. Its getting its a$$ kicked too.
One of the reasons its getting beat? Because Apple has a whole series of beautiful devices to showcase and play these goods-devices that are seamlessly integrated with a store that sells these goods. The UX of this integration of software and hardware is second to none, and beats hollow the UX of the Amazon mp3 store and the Android collection of phones (I say this as an Android phone user). If you are talking games, movies, and apps, the situation is even worse.
With Apple, hardware sales drive software sales, which in turn drive software sales. You can say Apple is a seller of hardware first, but it also has the world's largest music store and the world's largest software store.
Amazon plans to follow Apple's lead here and I think it has a good chance to at least challenge Apple's dominance, if it plays its cards right.