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Why Kindle Fire HD Won’t Hurt Apple Much...Yet

Friday, 7 Sep 2012 | 1:13 AM ET

Fresh from Amazon.com CEO Jeff Bezos' Kindle-palooza in L.A. on Thursday, my main reaction:

Wow.

Amazon has raised its game far more than I expected in the quality of its tablet hardware. The formerly plasticky 7" Fire has achieved a level of finish that rivals the Google Nexus 7. And the 8.9-inch HD? It doesn't feel quite as premium as the iPad, as it lacks its metal back and offers a (slightly) lower resolution.

Amazon Kindle fire HD
CNBC
Amazon Kindle fire HD

But for $100 less than the iPad 2, on hardware specs at least? It might just blow that device out of the water.

This may not, however, pose a huge immediate problem for Apple's iPad lineup. A few reasons for that:

1. The 9" Kindle Fire HD won't go on sale until Nov. 20. That's in time for the busiest part of the holiday season, but still halfway through the fourth quarter. Apple will have a chance to do a couple of product launches and actually get its new wares in front of customers before Amazon even starts shipping.

2. Amazon Vice President of Kindle Content Russ Grandinetti told me they'll be prepared to ship "millions" of each model of Kindle at launch, including the 9" HD. But the software isn't final for the HD, something Amazon has two months to remedy. The longer it takes to get the software final, the tougher it might be to get those many millions of units onto shelves or shipped out in those Amazon smiley face boxes.

3. Apple shipped 17 million iPads last quarter. That tells me holiday 10" iPad demand alone could easily hit 25 million units. How much might Apple expand the market with an 8" iPad? And how much of the total market share will Amazon be prepared to poach with the 9" Fire HD? I'd be impressed if Amazon can deliver 5 million 9" HD units (especially given that Amazon only managed about 5 million of the original Fire, and now there are three different models). It's just really hard to quickly ramp up volumes of any brand new device.

4. Amazon has content galore, and great services for the Kindle lineup. But a weak spot? Apps. It will take time for developers to build apps that specifically take advantage of the Fire's new 9" HD display, and I'd argue they can't start to do a really great job until the software is final and shipping. Even then, some will hold off to see what Android tablet sells better, Google's Nexus 7 or Amazon's 9" HD.

So Apple still has a bit of an advantage heading into the holiday season. And then in March and April of 2013 we can expect to see yet another new iPad.

Jeff Bezos has thrown down the gauntlet in front of Apple in convincing fashion, even challenging Apple's penchant for turning big profits on device sales. Expect the folks at Apple to take it personally.

If Apple responds with smaller, more affordable iPads that strike a chord with consumers, an impressive new iPod lineup, and a fresh approach to online services that finally seems on par with its meticulous design chops, it might beat back this challenge from Amazon. If not? Then in 2013 we may be talking about how much Amazon is hurting Apple.



email: tech@cnbc.com

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