Kindle - Good Device, Impractical Pricing

| About:, Inc. (AMZN)

I have enjoyed writing about the Kindle and (NASDAQ:AMZN) on multiple occasions over the past few weeks, so I decided that I'd try to bring everything together in one last post on this topic.

Both the Kindle 2 and the Kindle DX are attractive devices that perform niche functions spectacularly. If you're into reading books, both devices can make that hobby better. The Kindles have the ability to carry an entire library of books everywhere, and the ability to add to that library instantaneously from anywhere courtesy of a Spring-powered network. The e-ink in the reader is easy on the eyes, allowing for extended reading without the eyestrain that often comes from extended reading of an LCD screen.

One of the best aspects of the Kindle (which often goes unreported) are the thousands of free titles available for it. Virtually every book that is off-copyright can be read for free on the Kindle (as on any other e-book reader). A Kindle user can read all of Shakespeare, Mark Twain, and more without spending a cent on the literature itself. The content is often available for free in the Kindle store (which means easy wireless downloads anywhere) or can be found in PDF format, which the Kindle can also utilize.

That function, coupled with a price decrease could be the feature that expands the Kindle's market appeal. The current price of $359 is still prohibitively expensive, as the $5 bills saved on Huck Finn or The Merchant of Venice take way too long to add up. But if Amazon was able to offer Kindles to schools for a price closer to $100, the savings would add up and schools may be motivated to integrate the Kindle into textbook curriculum.

So my reoccurring analysis is that the Kindle is a solid device that prices itself out of practicality. The bookiest of bookworms may be able to see some savings and yuppies may buy the device for the "cool" factor, but it is not yet practical to substitute the Kindle for paper books. But more and more e-readers are entering the market, which should force Amazon to price its reader more competitively in the future. I don't doubt that there will be a day when many 7th-graders read Uncle Tom's Cabin on an electronic reading device. But today is not that day.

And the same overpriced thesis can be applied to Amazon shares. Amazon is a great company that has allowed me to make money (via selling on the website, not by owning the stock). As eBay (NASDAQ:EBAY) continues to slide towards irrelevancy, Amazon will become even more dominant in e-retail. But shares are ahead of themselves, and the potential for medium-term price appreciation from this point seems minimal.