Amazon.com Inc. (AMZN) unveiled its third generation of Kindle Fire tablets and boosted their prices, as the world’s biggest e-commerce company seeks to set itself apart in an increasingly crowded market.
The new Kindle Fire HDX costs $229 to $479 and comes in two display sizes, 7-inch and 8.9-inch, Amazon said in a statement today. While the prices are lower than Apple Inc. (AAPL)’s latest iPads and iPad minis, which start at $329, they are more expensive than the older Kindle Fire HD that started at $199. The HDX tablets have higher-resolution screens, faster processors, weigh less than their predecessors, and have 4G wireless capability.
Amazon is battling Apple and Google Inc. in the tablet market, where it remains a smaller player. While Amazon’s devices have done well in the holiday season, sales have dropped off after the rush. The company was No. 3 after Apple and Samsung Electronics Co., with 12 percent share in the fourth quarter of 2012, according to researcher IDC, and slipped to No. 4 with 3.7 percent share in the first quarter.
Amazon takes a different business approach with its tablets than its rivals. While Apple makes money on an iPad each time a tablet is sold, Amazon offers its devices at cost. The Seattle-based company instead aims to profit off the movies, books and music consumed on each Kindle Fire, Chief Executive Officer Jeff Bezos said in an interview.
“We want to make money when people use our devices, not when they buy our devices,” Bezos said. “We think that’s good customer alignment. No one has to be on the upgrade trend.”
The company has a history of offering some products and services at cost or at a loss in order to drive consumer engagement. Amazon charges just $79 a year for its Prime fast-shipping service, and members of the program tend to be some of the heaviest buyers of goods through its website.
Amazon has been spending to improve its Kindles, squeezing profit margins and contributing to a $39 million loss last year. Earlier this month, the company updated its Kindle Paperwhite e-reader, adding a sharper screen, faster processor and new features.
In total, the tablet market is projected to increase three-fold to $125 billion by 2017 based on units shipped, according to IDC.
Amazon shares are up about 26 percent so far this year, compared with a 19 percent gain in the Standard & Poor’s 500 Index, as Bezos pours money into fulfillment, cloud technology and Kindles.
Those who own a Kindle buy four times more books -- both physical and digital -- than those who don’t own one, an indication that the devices may spur sales of other sorts of products in the future, said Mark Mahaney, an analyst at RBC Capital Markets in San Francisco.
Sales of Kindles and the digital content people buy on them make up more than 10 percent of Amazon’s revenue, Mahaney said. Amazon may see a onefold or twofold increase in music and movie sales per tablet, he said.
As part of the rollout, Amazon is also debuting a new lower-end Kindle Fire HD for $139. Some of the new tablet models will ship next month, with others available in November.
The company is adding more high-end features to the new HDX tablets to attract consumers who may be accustomed to Apple devices. The 8.9-inch Kindle Fire HDX screen has 339 pixels per inch, more than the iPad, and weighs 13.2 ounces, about 10 ounces less then the iPad. Each HDX uses Qualcomm Inc. (QCOM)’s quad-core Snapdragon 800 processor, whose 2.2 GHz is more than three times faster than Amazon’s previous generation of tablets.
Amazon also added a new graphics engine to improve video-gaming experiences on the device. Games draw the most in-app purchases of all of Amazon’s applications on Kindle Fires, and the company recently added the ability to purchase physical goods on Amazon through apps as well. The company doesn’t disclose revenue figures for purchases on the tablet.
Amazon also included new security features such as hardware and software encryption, moving to appeal to businesses.
Another new feature is a button called Mayday, which connects the user to a customer service representative via video. It allows Amazon support staff to see a consumer’s screen as-is and draw on it -- arrows and circles to indicate how the consumer should navigate turning on child controls, for instance. The idea is to combine Amazon’s cloud-technology capabilities with its products, Bezos said.
“If you think about Amazon’s history, we have always been where we marry together high tech and heavy lifting,” Bezos said. “Mayday is another example of marrying high tech and heavy lifting.”
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