Quote:
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Citigroup’s Mark Mahaney, an Amazon bull, acknowledges that Apple will eat into Kindle’s share: He is convinced, quite reasonably, that Amazon needs to overhaul the Kindle very soon and cut its price below $200 to stay competitive.
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Wearing another hat, I follow financial analyst musings on a regular basis and the first thing one learns about most of them is that they are high on opinions, and have a low track record when it comes to predictions. It sounds harsh: but it seems the rare analyst who really "gets" a specific industry, the fundamentals and personalities within a company, the changing whims of the consumer in the marketplace, and a genuine feel for the alternatives.
Looking at the facts on the ground, Amazon has, in fact, been over-hauling the Kindle over the past eight months since it launched the Kindle 2 International edition; and we know the Kindle 3 is coming up shortly.
Nor is the real competition with Apple: is it really the position of this analyst that a device frequently three times as expensive as a Kindle 2 is going to steal enough share from Amazon to cause it grief? The core audience for the Kindle is not the core audience for an iPad.
In addition, there is direct competition from Kobo, Sony and perhaps two or three other players but none of them hold the cards that Amazon does with Kindle. Finally, this is an expanding category at the moment and everyone with the right moves and some mojo tends to do well for the interim.
Remind me again: if a mid-range iPad -- 32 GB memory with 3G access -- costs over $900 to purchase and operate in the first year ($729 iPad + $180 AT&T fees) ... compared to a $259 Kindle 2, by what stretch of logic does the analyst believe Amazon "must cut its price below $200 to stay competitive"?