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The Amazon tablet will be much more like the Kindle: an alternative, inexpensive device dedicated to Amazon’s content stores, bought and used primarily for reading books, browsing the newspaper, and watching movies.
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That's not really like the Kindle at all. I agree that they will have a 7" tablet as one of their models. My price guess for that is $299.
I think Amazon is more creative than to name it the "Kindle [X]," but they may very well do that. It's in their best interest to make the tablet stand apart, imo. They don't need the Kindle brand for recognition. They're Amazon. That's branding enough.
Also, Amazon allegedly set up an office building full of Android programmers a while back. Knowing Amazon, they will be putting a lot of polish and effort into their rendition of Android. This device is gonna be all Amazon, and my speculation is that the interface is gonna be impressive as hell.