Will Amazon's New Tablet Be the iPad's First Real Challenger?

| About: Amazon.com, Inc. (AMZN)

By Justin Dove

While Apple (Nasdaq: AAPL) and Netflix (Nasdaq: NFLX) grab most of the headlines these days, Amazon (Nasdaq: AMZN) lingers like a sleeping giant.

But not for long. What Amazon has planned could challenge both tech giants in one fell swoop.

The Wall Street Journal reported earlier this month that Amazon will release a tablet PC by October. As more details emerge, we get a clearer picture of what Amazon will offer. Some of the biggest developments are the new additions to Amazon’s video streaming service.

It was reported Thursday that Amazon closed a deal with NBCUniversal for streaming video rights, after reaching a similar deal with CBS (NYSE: CBS) last week. Amazon currently offers unlimited streaming of its digital content catalog with its Amazon Prime service. Amazon Prime runs $79 a year, much cheaper than Netflix, and includes cheaper rates on shipping for Amazon products. It’s also possible to stream individual shows or movies for an even lower cost, something Netflix doesn’t offer.

These signs point to Amazon setting up an innovative product. It already has Amazon Cloud Drive in place, a service that’ll certainly rival Apple’s iCloud. There are even rumors surfacing on the internet that Apple may be considering acquiring Barnes & Noble, Inc. (NYSE: BKS). This would give it an influx of digital content it could use to compete with Amazon. While there’s no weight behind the claim yet, it could be a sign that Apple feels a bit threatened by Amazon.

The Amazon Tablet’s Known and Rumored Tech Specs

Here’s what we know about the technical aspects of Amazon’s tablet:

  • Amazon will offer a seven-inch model and a 10-inch model. Unlike the Apple’s iPad, users will have a choice between a larger and smaller version of the Amazon tablet.
  • The Amazon tablet will not include a camera. It appears Amazon will focus on media viewing rather than generation. This doesn’t seem like such a big deal since most cellphones already have cameras. This will help keep the cost lower than the iPad’s.
  • It’ll use the Android Honeycomb operating system. The newest version of the current number two tablet, the Samsung Galaxy S, also uses this platform. It was designed specifically for tablets rather than smartphones.

There’s also some speculation as to what Amazon may do. Here are some of the prevailing rumors:

  • Amazon is likely to offer much less hard drive space on its tablet than iPad. It’ll probably do this to keep costs low and pump up its Amazon Cloud Drive service.
  • Rumors have the Amazon tablet loaded with NVIDIA (Nasdaq: NVDA) Tegra 3 processors, which run graphics about twice as fast as the Tegra 2 processors found in the newest Samsung Galaxy S tablets. This would certainly come in handy for streaming videos.
  • By sidestepping a camera and larger hard-drives, Amazon’s tablet could be sold much cheaper than comparable tablets. It’s rumored that Amazon might keep profit margins low for the hardware, while looking to upsell its digital content. Some suspect a price range of $300- to $400 – about $100 cheaper than iPad.

Amazon’s Advantage Over the Competition

There are a slew of tablets looking to match Apple’s success with the iPad, such as Samsung’s tablets and the Playbook by Research In Motion (Nasdaq: RIMM). And Sony (NYSE: SNE) is slated to release two powerful competitors this year.

But none of these companies offer Amazon’s extensive library of digital content. The convergence of its Cloud Drive and video streaming capabilities comparable to Netflix could really make this tablet valuable. Theoretically for the price of an iPad, one could have an Amazon tablet and unlimited access to a library similar to that of Netflix. The music catalog would also rival iTunes. It doesn’t hurt that Amazon can advertise the product as much as it wants on its home page, much like it’s done with the popular Kindle.

There are no guarantees Amazon’s tablet will be a winner out of the gate. There’s certainly stiff competition on the way. But with the confluence of events leading up to its big release, there’s a possibility Amazon will be a real sleeper in the tablet market.

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