Can Amazon Kindle Fire Hurt Apple iPad 2 Sales?

Amazon has unveiled its Kindle Fire tablet on Sept.28, with a shipping date of Nov.15.

The online retail giant has incorporated key features to attract consumers, including a new browser -- Amazon Silk - and it also offers a 30-day free trial of Amazon Prime that allows access to streaming of Amazon's multimedia library of movies and TV shows. Amazon is investing heavily in Prime by bringing new content from CBS, NBCUniversal, and Twentieth Century Fox.

However, the key attraction to the tablet is its cost at $199. Tech enthusiasts predict Kindle Fire as an iPad killer due to its ecosystem and content similarities to Apple's tablet. In addition, Amazon's Kindle e-reader has a huge following.

A recent survey shows that there is a strong demand for Kindle Fire, even surpassing the pre-launch demand for iPad when it was first released in 2010.

Survey data showing strong pent-up demand for Amazon's pending Kindle Fire tablet may offer near-term headline risk for Apple.

Proprietary ChangeWave survey data show that 5 percent of 2,600 respondents have already pre-ordered or very likely to buy the Kindle Fire, exceeding pre-launch iPad buying intentions. In February 2010, the same survey showed that 4 percent of 3,200 respondents were very likely to Apple's iPad.

Not surprisingly, price ($199 vs. $499 iPad) is the major attraction, and may spur impulse buying, RBC Capital Markets analyst Mike Abramsky wrote in a note to clients.

Other tablet contenders such as Xoom, Galaxy Tab, PlayBook, etc, have failed to gain appreciable traction against iPad's est. 67 percent share, and iPad 2 should be a popular holiday purchase. However, strong early Fire uptake seems likely, raising speculation Apple now faces a real tablet contender.

Survey data say 26 percent of likely Kindle Fire buyers (i.e. of the 5 percent) say they will delay/put on hold iPad buying. Sustained Kindle Fire uptake and 'buzz' will depend on consumer/reviewer reactions to Kindle Fire's user experience.

Amazon's cheaper tablet is expected to do all the basic functions that one normally does on a tablet such as email, surfing Web and watching videos. So, if the tablet manages to do well on these fronts, then it could be an excellent alternative to iPad for price-conscious consumers.

In addition, the tablet could definitely appeal to entertainment audience as Amazon would integrate the tablet tightly with its Cloud services that would sell books, movies and music, giving a stiff competition to Apple in terms of content.

However, iPad 2 has its own advantages. Apple's ecosystem has over 600K apps (100K iPad apps), more than 225 million iTunes accounts and facilitates multi-device tie in. iPad could be used as a post-PC device with 10-inch display and 3G. Kindle Fire comes only with Wi-Fi and lacks a camera, which may disappoint photo geeks and also takes away the feature of video calling, a must-have feature in today's tablets. The iPad2 has a VGA camera on the front and a 720p camera on the back for video calling.

iPad is supported by a global distribution via retailers, carriers and online in 90 countries while Kindle Fire is available only through online.

However, Kindle Fire's near-term impact may be stronger and may hurt Apple's iPad sales if some iPad 2 potential buyers hold off their purchase to try the Kindle Fire.

Following is a comparison of iPad 2 and Kindle Fire: