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Yoshikami: iPad & Kindle—Room for Two!

Sales of Apple’s latest product, iPad have hit 3 millionsince its launch and that’s in just 80 days. This is destined to give Apple the shot it needs to continue its star performance the company has achieved in recent years. Amazon’s Kindle, some contend, seems to be limping along. It is locked in a pricing war with Barnes & Noble and has had to drop the price of Kindle to US$189 from US$259.

Interesting headlines appearing simultaneously, and it makes one wonder if Amazon's move into digital books will end up being crushed by the Apple Job juggernaut. I suppose it depends on what business you believe Amazon is in. Perspective matters.

Source: Amazon.com

What business is Amazon in?

If Amazon is sectored in the hardware business category, then the writing is on the wall; they will be strongly impacted by Apple and other multimedia device makers as the product they sell is merely for readers.

True there are some rudimentary features available besides being an e-reader, but they are not very compelling.

However, if the view is that Amazon is in the digital content space, then iPad will not become a killing threat to Amazon and its digital book business. In fact, one of the most popular applications for the iPad as of today is the Kindle reader. The iPad is designed for internet browsing and running applications, whereas the Kindle is best suited for reading text. As such, demand for the Kindle could hold up over time as the best way to read digital books.

Amazon is releasing a version of its reader softwareto Google's popular Android platform which means Kindle books will be available on Macs, PCs, and virtually all smartphones. As a first entrant into the e-reader market, Amazon is clearly the leader in content and is compelling consumers to stay with their format to avoid the need to buy new material for new devices.

The Kindle ecosystem is wide ranging and the depth and breath of eBooks, content and other content has expanded dramatically since the first Kindle was launched in November 2007. Kindle continues to be a multi-billion dollar opportunity for Amazon, and will likely grow as more and more consumers get used to the idea of e-readers. Amazon can succeed with its own Kindle reader and the iPad platform.

Room for Two

Apple has its own bookstore but there's no reason why both formats can't exist side-by-side particularly if Amazon's content can be read on Apple devices. And with cross synchronization as a feature for am Amazon content, Amazon has wisely staked its place as a continuing player in this emerging market.

Likewise, there is much going for iPad, which is benefitting from recent and ongoing enhancements in various supporting technologies, including color touch screens, improved processing power, graphics, and memory in mobile chips, the roll out of 3G and 4G, as well as increasing availability of WiFi. In my discussion with our Research team (all Tech users), the impact of the iPad is understood (Thanks BTW to Mark and the Research group for their contribution to this column).

So as usual when you read headlines look below the surface and ask what business results might follow. Apple and Amazon can both be successful for different reasons and their business profits are not necessarily a zero sum game; both companies can compete and succeed. There's enough pie for both of these two media/technology giants.

____________________________
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at m@ycmnet.com.

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