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11:23 AM

Kindle Fire A Legit Sales Threat To iPad

Amazon's full-color Kindle Fire tablet already holds second place in the market, ahead of Samsung Galaxy Tab and Nook Color.

Amazon Kindle Fire: Visual Tour
Amazon Kindle Fire: Visual Tour
(click image for larger view and for slideshow)
Kindle Fire appears to be taking a bite out of Apple's iPad sales and, after just two months on the market, Amazon's device is already the number two player in tablets, according to research released Friday.

Amazon is on pace to ship 3.9 million Kindle Fire units by year's end, analysts at IHS iSuppli said. That would give it 13.8% of the global tablet market, good enough for second place behind Apple and its predicted share of 65.6%, and well ahead of Samsung's estimated share of 4.5% for the fourth quarter. Samsung introduced the Android-based Galaxy Tab last year.

Barnes & Noble, which unveiled the Nook Color last month, is on pace for a share of 4.7% by year's end, while iSuppli estimated that HTC will close out 2011 with a share of 1.3%.

Amazon's share is almost double the 7.7% expansion of the tablet market that iSuppli said occurred after the launch of Kindle Fire, meaning that at least some of the tablet's sales are coming at the expense of the iPad. Indeed, iSuppli said Apple's share of the tablet market is poised to drop 4.1% from the third quarter.

[ Other vendors are struggling in the tablet market. Read RIM Burned For $485 Million By Unsold PlayBooks. ]

"Almost two years after Apple rolled out the iPad, a competitor has finally developed an alternative which looks like it might have enough of Apple's secret sauce to succeed," said Rhoda Alexander, senior manager for tablet and monitor research at iSuppli, in a statement.

Kindle Fire's success may owe much to the fact that it's priced at just $199, making it a loss leader for Amazon. The least expensive iPad 2 model starts at $499. Despite its thrifty price tag, Kindle Fire includes a wealth of high-end features.

The Android-based device has a LCD screen that displays 16 million colors in high-resolution (1024 x 600). In-plane switching technology provides wide viewing angles. A dual-core processor, said to be from Texas Instruments, keeps everything snappy. And Kindle Fire checks in at 14.6 ounces, making it easy enough to hold in one hand for most people.

Its real differentiator, however, is a new kind of browser, called Silk, which performs some functions locally while handing off other tasks to Amazon's AWS cloud data center. Amazon claims that makes Silk faster than competing mobile browsers, like Apple's Safari.

Kindle Fire also features a direct link to Amazon's vast trove of books and magazines, as well as to third-party content from partners like Netflix, Hulu, and Pandora.

"The initial market response strongly suggests that Amazon, with the Kindle Fire, has found the right combination of savvy pricing, astute marketing, accessible content, and an appropriate business model, positioning the Kindle Fire to appeal to a brand-new set of media tablet buyers," said Alexander.

Kindle Fire was one of the hottest selling products over the recent holiday weekend. Retailer Target publicly said it sold more of the Amazon tablets than it did iPad 2 units.

Amazon shares were up 0.87%, to 198.85, in morning trading Friday.

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