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Amazon Expected to Unveil New Kindle as Tablet Wars Heat Up

Amazon.com

Source: Amazon.com

is expected to unveil a new Kindle Fire on Thursday as it seeks to take a bigger bite of the tablet computer market and boost sales of digital goods like e-books and movies.

The announcement at a former airplane hangar in Santa Monica, Calif., will feature CEO Jeff Bezos, who announced the first $199 Kindle Fire in New York less than a year ago.

In the nine months since it began selling in November, Kindle Fire has captured 22 percent of tablet sales in the U.S., Amazon said last week.

The company also said it sold out of the devices, which suggests that Amazon halted production in preparation for a new model.

Amazon.com

Although it didn't divulge actual sales figures, analyst Anthony DiClemente with Barclays Capital estimates that Amazon sold 7 million tablets combined from November through the end of June.

Its sales amounted to just 5 percent of the global market in the second quarter, far smaller than the 68 percent market share for Apple's iPad, and behind the 10 percent share for Samsung's Galaxy Tab, he said.

Apple sold 17 million iPads in the April-June period alone, and more than 84 million since its debut in 2010.

Amazon has pursued the strategy of selling lower-priced tablets at razor-thin, if any, profit margins in order to boost sales of digital items from its online store. Its Kindle Fire is half the price of Apple's cheapest iPad, which sells for $399. It also has a smaller screen, lacks a camera and only connects to the Internet over Wi-Fi.

“Even though you've seen the stock run up quite a bit into the press conference, for investors of Amazon, I think it's a little bit of a mixed emotion in terms of whether or not they're excited about Amazon even being in this business," Ken Sena, managing director of equity research at Evercore, told CNBC on Thursday.

"For investors, while they would like to see a product that is compelling for users and will sell well, I think ultimately they want to say, ‘Ok, when does this actually help the bottom line, too,’” he added.

A newer model might resolve some of these shortcomings. Amazon is also expected to offer a new lineup of Kindle e-readers, which have screens that render images and text in black and white and sell for as little as $79.

Amazon.com

Amazon is facing tougher competition. In July, Google began shipping its $199 Nexus 7, a tablet that is about the same size as Kindle Fire but boasts a better quad-core processor, compared to Kindle Fire's dual core, a camera and an updated version of the Android operating system.

Microsoft will start selling its Surface tablet, which has a screen that is 10.6-inches diagonally, in October with prices that are expected to be more in line with the iPad.

There is also speculation that Apple may also unveil a smaller iPad at an event in San Francisco next Wednesday that could reduce the price gap between it and other offerings.



email: tech@cnbc.com

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