Amazon May Cut Into Tablet Game with Low-Price Offering

The unnamed Amazon tablet could undercut the price of all major competitors and keep the company competitive according to an analyst.

In a column with PCMag, tech industry analyst Tim Bajarin says Amazon may be able to undercut prices in the tablet market with a competitive offering. Bajarin said through information he has obtained on components and analysis, he's deduced the Amazon tablet would cost $300.

However, he says if Amazon discounts the device at $51 and prices it at $249, the company could easily make the money back within six months of the tablet's release date and reap a profit of 10-30 perfect within 12-18 months.

He says this could happen if a consumer purchased five items through the Amazon store, bought buy or rented 15 movies, streamed or downloaded 50 songs, bought 18 books, and paid $5 a month for cloud storage from Amazon. All of this, as well as advertising, would help Amazon gain profit in a low-priced tablet.

"Of course, there are a lot of variables in this model, but you get the idea. The tablet is the razor and all of these apps and services are the blades, and for two years, these purchases are tied to an amortized business model to cover the cost and profit of the device," Bajarin wrote.

This low-price tablet would have a tremendous affect on the industry - especially other tablets who use the Android operating system. Bajarin is not the only analyst to suggest Amazon would offer a low-price tablet. Back in March, Forrester's Sarah Rotman Epps said Amazon could offer a low-price tablet that would do well against Apple's iPad. Epps cited Amazon's brand, content, and retail channel as reasons for this.

The idea of a tablet price war has been brewing for some time in the industry. HP recently slashed the price of its Touchpad price by $100 to make it $399 and $499 for its 16 GB and 32 GB tablets respectively. Motorola has already slashed the price of its Xoom tablet. Both companies are looking to earn ground against Apple's iPad, which has roughly 85 percent of the burgeoning market according to Needham analyst Charlie Wolf.

A tablet at $249 would be the lowest price for a high-end tablet competitor to the iPad. Some analysts, like Wolf, don't hold out much hope for iPad competitors. Wolf says by 2020, the iPad will still have a whopping 60 percent of the tablet market share.

Follow Gabriel Perna on Twitter at @GabrielSPerna