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Ned Ward, 59, is looking to buy a Nook Color on his lunch break. He plans to use the "$25 off a Nook" coupon e-mailed to Barnes and Noble subscribers.


Kindle e-reader fires up Amazon.com's revenue

by Meghan Schiller
Jan 31, 2012


tablet

Meghan Schiller/ MEDILL

Shoppers at Best Buy browse and compare the tablets on display.

The tablet war is on and a decisive winner may not be clear for years. Amazon.com Inc., the maker of the Kindle Fire, released fourth quarter results that blew away revenue numbers from last year because of Kindle sales. But the bottom line fell short of analysts’ expectations and Amazon shares plunged nearly 9 percent Tuesday.

Available in all different shapes and sizes, electronic reader tablets take up two rows of space in the Best Buy store at Chicago’s Water Tower Place. Because e-readers are lighter than a laptop and conveniently larger than a smartphone, Goldilocks might call them “just right.”

With a large amount of options at their disposal, some customers are relying on one key number to make their decision: price. The Kindle is the least expensive tablet on the market and consumers gobbled them up during the holiday period.

Amazon’s revenue soared 35 percent to $17.43 billion from $12.95 billion in the year-earlier quarter. Even so, Amazon’s fourth-quarter net income came in at $177 million, or 38 cents per diluted share, down 57.5 percent from $416 million, or 91 cents per diluted share, a year earlier. The company said its surging revenue and drop in net income resulted from heavy spending on expansion and new ventures.

Kindle unit sales, including the Kindle Fire and e-reader devices nearly tripled during the nine-week holiday period ending Dec. 31. The company declined to provide unit sale numbers.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Jeff Bezos, founder and CEO of Amazon.com. “Our millions of third-party sellers had a tremendous holiday season with 65 percent unit growth and now represent 36 percent of total units sold.”

So can Amazon’s revenue growth compete with those of its competitors including tablet industry leader Apple Inc.?

The Kindle Fire, released in November, is available for $199.99, and boasts 18 million books in the Kindle e-book store, not counting movies, TV shows, apps, songs and magazines. It features 8 gigabytes of storage, color liquid crystal display screens, wireless capability and free cloud storage for Amazon content. The tablet holds a charge for eight hours.

“The Kindle is the best entry-level tablet,” said Mike Rebman, 25, a tablet specialist for Best Buy. “There is less versatility with the app selection, in comparison to the iPad’s 500,000 apps, but if that’s not what you’re using it for then it’s good.”

For heavy users looking for a more on-the-go tablet, he recommends the iPad.

“With the largest selection of apps, it is more versatile for someone who wants to use it as a primary device,” said Rebman. “It is higher quality and outperforms all of the other tablets on the market.”

The iPad 2 dwarfs the Kindle in size and its price reflects the added features. A 9.7-inch LED backlit screen, multi-touch screen, front and back cameras, 3 gigabyte data service and up to 10 hours of battery life costs customers up to $699. The cheapest option, with 16 gigabytes and wifi, runs $499.

“It’s a bigger version of my iPhone,” said Bob Doyle, 50, who was reading the Wall Street Journal online in a Streeterville Starbucks.

“The iPad is great for consuming, but horrible for creating,” he said. “I read my Amazon books on it, my email, and news. I got it at work because my company adopted it early.”

The software firm he works for in the suburbs adopted the iPad as a corporate platform when it first came out. He doesn’t see them switching anytime soon, but he believes the Android technology will win in the end.

“Apple won’t reign supreme forever,” he said.

But Charlie Clark, 26, believes it will.

“You’d be knackered out to try to beat the iPad. The Kindle is nowhere near it,” he said while shopping on holiday from London.

“I wouldn’t go with the Kindle, but will probably upgrade to the iPad 3. There wasn’t enough difference between the iPad 1 and 2.”

For all of 2011, Amazon's profit fell 45 percent to $631 million, or $1.37 per diluted share, from $1.15 billion, or $2.53 per share, in 2010. Sales rose 41 percent to $48.08 billion from $34.20 billion a year earlier.

Last week, Apple posted first-quarter earnings of $13.06 billion, or $13.87 per diluted share, that beat analyst estimates. Revenue soared to $46 billion IPad sales more than doubled to $15.4 million.

If Apple fears Amazon’s continued tablet success, it isn’t letting on.

“When I looked at the data, particularly in the U.S., after Amazon launched the Kindle Fire, there wasn’t an obvious effect, plus or minus,” said Apple’s CEO Tim Cook in a media conference call.

“I wouldn’t say this is a two-horse race...We’ll just want to focus on making great products. We ignore the number of horses on the track — we just want to be the one in the lead.”