In its second-largest acquisition, Amazon buys the company for $970 million.
Analysts say the world’s largest online retailer is preparing a tablet launch in the fall.
Amazon.com will launch a tablet computer in the coming months and could sell some 300,000 of the devices over the holiday season, says Herman Leung, an analyst with Susquehanna Financial Group.
Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, did not respond to repeated requests for comment about reports this week that it will launch a tablet computer with a 9-inch screen and Android operating system by October. The move would put Amazon into even fiercer competition with Apple Inc., which in April 2010 launched the iPad, the best-selling tablet; Apple is No. 3 in the Top 500 Guide. Amazon would be seeking to tap into an exploding area of consumer electronics and e-commerce, with 44 million tablets expected to be in use by 2015, up from 10.3 million in 2010, according to a projection earlier this month from Forrester Research Inc.
Leung says that based on checks performed by Susquehanna—which trades Amazon stock—the retailer has ordered millions of component parts for up to 4 million tablets, and other analysts reportedly put that figure as high as 5 million. He expects the Amazon tablet to sell for between $300 and $500. “There is potential for Amazon to potentially subsidize part of them to drive adoption of this initially,” he says. A recent research report from Susquehanna said Amazon could sell $120 million worth of tablets in the fourth quarter.
Amazon could drive sales of its tablet by persuading consumers that it has the most extensive content for the devices, he adds. That includes not only electronic books, but also TV and film content; consumers who sign up for Amazon Prime, for instance—that’s the retailer’s $79-per-year free shipping program—receive streaming access to 6,000 movies and TV shows. And Leung points out that Amazon recently boosted its streaming reach with the January announcement that it would buy U.K.-based LoveFilm International Ltd.
One potential challenge for Amazon is that it would be creating a competitor to its own Kindle electronic book-reading device, as reading e-books is one of the ways consumers use the iPad and other tablets. Amazon has heavily promoted Kindle, and says it’s the e-retailer’s best-selling product, but has not disclosed sales figures.