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The question is what is Amazon more interested in selling - eBooks or Kindles?
If Amazon is more interested in selling Kindles then why bother working on an iPhone reader app because that could very possibly cannibalize Kindle sales. There are quite a few folks iPhone owners who wouldn't bother to get a Kindle if there was a competing reader app for the iPhone. Heck, given the full color display on the iPhone/iPod touch I would bet that text could be displayed in a manner that mimicked the look of digital ink.
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