The reason, as TechCrunch notes, is to sell as many razors as possible because it owns all the blades. The new Kindle, and the Kindle Fire Tablet, are geared toward selling content directly from Amazon's EC2 cloud.
While most analysts will focus on the competition with Apple, Robert Scoble thinks that Blackberry (RIMM) and Microsoft (MSFT) will suffer the most pain. RIMM is dead, he says, and it sucks Microsoft into a difficult price war if it wants any traction at all for its coming products.
There could be another victim. Retailers like BestBuy (BBY). As Allbusiness notes all sales on Amazon, hardware, software and services, are direct. From the producer to the consumer. No middle men, anywhere. No stores, no warehouses not owned by Amazon.
This isn't a story about features. It's about price points. Speculation had been that the Fire might go for $249, with a discount for existing Amazon Prime customers. Instead, the Fire comes in at $199 with a free trial of Prime to all buyers, and the older Kindle eReaders drop below $100. There's also a new Kindle Touch eReader, with cellular capability, priced at $149. A version of the Touch with only WiFi comes in at $99.
Amazon also announced something unexpected, a browser called Silk that brings all this together. Silk's capabilities are divided, between the client and Amazon's servers. This may be the key to going after Google (GOOG), which also offers Android devices.
Amazon forked Android, which is based on Linux, to make its new Kindles, and what Silk does is restrict the capability of the Kindle when it's linked to any site but Amazon. The idea is that Silk optimizes the use of Amazon's network when users are downloading files, making downloads from Amazon much faster.
The review at Engadget is summarized in one word – wow.
Optimists need to understand a few caveats before rushing into the stock:
AMZN was already trading at a PE near 100 before these announcements.
Amazon.Com won't be making much profit on its hardware. Profits depend upon people buying books, movies, and music from the service.
The Fire is not a general-purpose device. It has no cellular capability, just WiFi.
Amazon's sourcing ability, and its customer service capability, will be tested by this launch. Any problems are certain to draw a lot of publicity, all of it negative.
Still. Amazon has been building out its cloud service for a decade, and may now be #2 in Internet infrastructure costs, behind only Google. Amazon has scaled its customer service capabilities through its merchandising, which is now a cheaper channel than even the famed Apple Stores. It's as much, or more, than those who overpaid for Amazon all year were hoping for.
The Kindle Fire ships November 15. The non-touch version of the new Kindle ships today, while the other two touch versions are available for pre-order now and ship November 21.
Disclosure: I am long GOOG.