Seeking Alpha
Growth at reasonable price
Profile| Send Message|
( followers)  

A year ago, right before the original Kindle Fire was launched, there was a media frenzy on how good it was. I actually got excited too, and pre-ordered one. Cloud-accelerated "Silk" web-browsing? IPS screen display and a dual-core processor tablet for only $199? Sign me up.

As a purchaser of the original Kindle Fire, Amazon has a long way to go to earn my trust back. With all of their talk about how fast the 'Silk' browser was going to be, it never really delivered. The OS pales in comparison to the iPad. If Amazon wants to hang with the big dogs, they have to show they can deliver world-class software, not just cheaper hardware - Bart Lee at The Verge

Just like Bart, when I received my Fire, I was very disappointed. "Silk" web-browsing was all but slow and laggy. The user-interface was a dumbed-down "Microsoft Bob-like" mess, which added to the bloat of the underlying operating system hurting performance and decreasing functionality. I felt I got taken. I was not alone.

The evidence shows the Kindle Fire sold well out-of-the-gate during the 2011 holiday season to people that trusted Amazon (NASDAQ:AMZN); however, once the weak word-of-mouth spread, sales collapsed in 2012.

Click to enlarge

Look how Kindle Fire buying intentions faded and customer satisfaction fell to 41% (it was 56% a few months before), the lowest out of the major tablet models.


IHS iSuppli said Kindle Fire's market-share fell to 4.2% by Q2-2012, and IDC said the Kindle Fire market-share was 5.0% in Q2-2012 also (Source).

Jeff Bezos told the Kindle Fire HD event audience last week the worst thing that can happen for Amazon is if customers let their Kindle Fires collect dust in their drawers, because the company takes a moderate loss selling each device (directly implied in this interview).

The evidence says that is exactly what happened to the Kindle Fire.

Chitika analysis shows the Apple (NASDAQ:AAPL) iPad took 94.64% tablet-based web traffic market-share. Kindle Fire's market-share was close to 0%.

Apple iPad versus Android tablets

Flurry Analytics showed analogous usage numbers with Kindle Fire user session market-share of only 3%.

So like last year, the mainstream media led by Gizmodo and TechCrunch went into a frenzy last week after the Kindle Fire HD launch event, hyping up the new devices by regurgitating every Jeff Bezos PowerPoint talking point and saying Apple and Google (NASDAQ:GOOG) were in big trouble.

When in reality, the Kindle Fire HD situation is very similar to the Kindle Fire a year ago. Let's critically analyze and see through the marketing spin:

1. The amazing $49.99 per year 4G LTE Package

The biggest gasps during the event were when Jeff Bezos presented the slide above. I was wow-ed by the pricing too, since it was 80% lower than any comparable offering in the market today.

"$49.99 per year" sure sounds like "$49.99 per year," right? Wrong.

"There was confusion during the event over whether the cost of the data was being subsidized by Amazon and would revert to original prices. An Amazon spokeswoman confirmed that the $50 cost is only for the first year, and "after that customers can choose from one of AT&T's other standard plans." - TheStreet.com

"For the first year, Fire HD 8.9: owners can pay $50 once for 250MB/month. After that year ends they go to a traditional data plan by AT&T. Monthly plans normally cost $15/month" - AnandTech

So after the event, Amazon confirmed to two reporters that the $49.99 was only for the first year and regular AT&T standard plans apply after then. That event presentation slide is misleading, no? It isn't exactly clear on the Kindle Fire HD product page either.

2. The best hardware at every price-point

Jeff Bezos bragged repeatedly that the company now had the best hardware at every price-point. The Texas Instruments 4460 processor inside the 7-inch Kindle Fire HD is actually pretty old. It didn't take me long to find some real benchmarks for the chip.

Since the Google Nexus 7 tablet is the main competition for the 7-inch Kindle Fire HD, the processor benchmarks show the Nvidia (NASDAQ:NVDA) Tegra 3 chip out-performs the 7-inch Kindle Fire HD Texas Instruments (NASDAQ:TXN) 4460 chip by 85-192%.

On graphics benchmarks, the Google Nexus 7 Tegra 3 chip beats the 7-inch Kindle Fire HD Texas Instruments 4460 chip by 52-53%.

OMAP 4460 inside the 7-inch Kindle Fire HD is likely to end up slower since it's pretty much the same chip that we tested in Galaxy Nexus last year. It ends up significantly slower in most benchmarks than the latest flagship phones. - Fudzilla

It's not just the benchmarks, watch this YouTube video showing the new Kindle Fire HD offering a lagging and stuttering weak user experience/performance just like last year's model:

Even the pinch/zoom in the browser section had huge lag. Simply awful. I confirmed with someone who was at the Kindle Fire HD launch event, he said he had the same experience as the YouTube video above. Other tech reporters noticed the lag too:

"both the Fire HD units stuttered occasionally in demos"
"Fire HD models pre-load all non-streaming media (books, magazines) prior to viewing, which even under fast networks makes the tablets appear to lag"
"While waiting for the book/magazine to load, users still have full access to the device, but no loading screen and the darkened selected reading material just makes the whole process feel cheap, like it can't load properly" - Anandtech

"it did feel sluggish and had problems loading a couple things, including a movie. I'm not sure if that was the custom Texas Instruments processor or not, but the devices' performance could have been quicker." - TheStreet

"Movies launched within a few seconds (and sometimes took longer than we would have liked)"
"Navigating wasn't as smooth as we expected and even after the Amazon rep exchanged a very sluggish unit for a much smoother-performing one, launching games and navigating to different nodes took a couple seconds longer than we would have liked" - CNET

"Speed still appears to be an issue on the Kindle Fire HD. After tapping on an app or a photo, there's a bit of lag time before you're taken to your destination. It's the same if you flip too quickly through a magazine or book. This came up on the Kindle Fire HD and the Kindle Fire across a variety of apps and media." - CNN

3. Kindle Fire HD models are ad-supported


In the past, Amazon has clearly talked about ad-support subsidization of Kindle e-reader models. The product information page of the ad-supported models were also clearly labeled on top.

With the new Kindle Fire HDs, Jeff Bezos decided not even to mention it at the launch event. And if you wanted to find out about the ad-supported information, you had to click on a microscopic link on the 9th line item of the product info page. In fact, the new Kindle Fire HDs are even worse that previous Kindle ad-supported ones because in addition to a sponsored lock-screen, there is also an ad on the lower left of the Kindle Fire HD home-screen.

If Amazon was up-front about the ad support at the event, that would have been better, but it didn't even mention it. Not cool. Yesterday, Amazon back-tracked and offered an option to opt-out of ads for a $15 fee.

4. Kindle Fire HDs do not come with a wall charger

Unlike last year's Kindle Fire, Google Nexus 7, and Apple iPad, the new Kindle Fire HDs do not come with a wall charger. This adds $10-20 of cost to the price, depending on whether the consumer buys it at the beginning or later (Amazon charger product page).

Somehow I get the feeling if Apple tried to do and get away with anything like the points above, there would be a fire-storm. It seems Amazon gets a free pass.

To close, I'm going to focus on the 7-inch Kindle Fire HD, because that is where the key battleground is this Christmas.

Unlike last year, when the Kindle Fire was the only game in town in this segment, Amazon is even in a worse position this year due to the viable competition at the lower price point.

We have the $199 Google Nexus 7 tablet, $199 Kindle Fire HD, and the widely-anticipated 7.85 inch iPad Mini coming in October (leaked by dozens of Asian supply chain reports and internal sources reported by The Wall Street Journal and Bloomberg). I simply don't understand why anyone would buy a Kindle Fire HD vs. the alternative offerings.

Why would you want to buy a 7-inch Kindle Fire HD with a laggy, old weak performance dual-core Texas Instruments processor, only 50,000 apps in the Amazon app-store, ad-supported home-screen and lock-screen, and a dumbed-down user interface with less operating system functionality?...

...Compared to a Google Nexus 7 tablet with a speedy quad-core processor, 600,000 apps in the Google Play store, access to the Kindle app, full Android 4.1 operating system functionality, and no-ads - for about the same price? (Google Nexus 7 comes with a $25 content credit currently, and a wall charger, while the Kindle Fire HD doesn't have a wall charger, but has more built-in flash memory. All-in-all, in the same ballpark price if you net things out.)

Previous iPads don't have the lag stuttering problem prevalent in the Kindle Fire last year and this year's Kindle Fire HD model. You can pretty much guarantee that the iPad Mini won't lag or stutter. With an estimated price range of $199-299, a better performing more featured operating system, the full iTunes eco-system, more tablet-optimized apps than any platform, a Kindle app, and access to Amazon Prime video content, there is also no sense in choosing the Kindle Fire HD over the iPad Mini when it will be in the same price range ball-park.

"A cheap product might sell some units and somebody may get it home and you know, they feel great when they pay from their wallets, but then they get it home and use it, and the joy is gone. And the joy is gone every day that they use it and that's why they're not using it anymore! You don't keep remembering "Oh, I got a good deal," because you hate it!"

"I think people at the end of the day, they want the great product"

"the customers that we're designing our products for, are not going to be satisfied with a limited function kind of product" - Tim Cook, CEO of Apple

(Yes, I believe Apple will come out with a cheap and great product with the iPad Mini. Tim Cook was referring to the Amazon Kindle Fire when he said "the joy is gone", "not using it anymore", "you hate it", and "limited function kind of product.")

Last time I checked, more apps, more performance, more operating system features/functionality, and being more honest and transparent with consumers, instead of trying to hide things and nickel-and-diming them is better than less. Don't buy the Kindle Fire HD hype.

Source: Don't Buy The Amazon Kindle Fire HD Hype