I'd agree that perhaps Cloud storage is OK for typical, casual user. But there are many situations where it just won't work:
- Travelling on a plane, ship, bus or coach which doesn't have WiFi
- Using the device outside of urban zones (trekking, at sea etc.)
- Professional (or semi-pro) uses. Quite often one needs many files on hand (references, presentations, databases etc.) and just can't wait till they download from the cloud
- Personal videos. I can understand that there are many people for whom commercial movies are enough, but there are quite a few who like to shot, admire, share and store their own! Storing these in the cloud is a no-no!
- Photographers: Kindle Fire could have been a nice device to review the photos you have just shot, on a relatively big screen, if only it had an SD slot!
In fact, I could give half a dozen situations from my own experience when there was no access to the internet and I badly needed a particular file. Luckily, it was there - on my pendrive or SD card. Perhaps the most untypical was a situation when I needed some sheet music for a service in a church. There was no internet in the whole building but an SD card full of PDFs (which I had in my wallet) saved my life. I am sure many people would be able to recount a similar story when there was no WiFi (or it was too slow) and their only hope was a USB stick or SD card.