Amazon To Take on iPad With Android Tablet Of Its Own

We've seen a number of prominent tablets launch so far this year, including the Motorola Xoom, BlackBerry Playbook, Galaxy Tab 10.1, and Hp TouchPad. Each has its own strengths and weaknesses, but none has managed to hold a candle to the iPad / iPad 2. Whether measured in terms of sales or consumer anticipation, the iPad continues to outsell all challengers, even when challenged by products that outflank it in terms of technical specs or price point.

According to the Wall Street Journal, Amazon is planning to dive into these shark-infested waters with a tablet of its own. Little is known about the device (it's rumored to feature a nine-inch screen); the paper quotes unnamed sources as saying the tablet has been designed by a third party Asian manufacturer (rumored to be Foxconn). Other sources, however, indicate that Amazon may be working on its own custom option--either as a backup plan, or as a separate initiative.

Amazon's Android App Store make an expansion into tablet hardware logical, but it's unclear how the company would balance a new tablet product against the already-existent and highly profitable Kindle. Here, simple product differentiation may make the difference. The Kindle 3 WiFi starts at $139 ($114 if you agree to advertising). Tablets, in contrast, are several hundred dollars more expensive. We're going to see this gap shrink in the future, but there's no reason why a nine-inch Amazon tablet has to inherently compete with an Amazon Kindle, particularly if Amazon brings the latter down to the all-important $99 price point in a future revision.

The current Kindle is $139 for WiFi-only, $116 for the ad-supported version

The only thing Kindle and a hypothetical Amazon tablet share is common access to Amazon's growing digital library. While Amazon has undoubtedly lost a few potential Kindle buyers to devices like the iPad, there's no evidence that the popularity of the iPad/iPad 2 has drained the ranks of Kindle customers. This further implies that the devices serve two distinct markets. The E-Ink technology Amazon uses for the Kindle's display may well be part of why; E-Ink is much easier to read in high contrast environments.

Amazon may also be one of the only companies that could challenge Apple when it comes to offering digital content libraries. Unlike RIM, Motorola, or Samsung, Amazon's real strength is in its various subscription services and sales outlets, not in hardware design. Contracting a third-party to build the tablets is a calculated risk, but consumers have thus far resisted buying tablets marketed on the basis of their spec sheets or even their support for Adobe Flash. Amazon doesn't have quite the same mindshare as iTunes, but it has the best chance of competing with the length and breadth of the former's offerings.

Perhaps more importantly, it's also one of the few companies that seems to understand what customers are looking for beyond a decent hardware experience. Amazon should be able to leverage what it's learned while developing the Kindle without cannibalizing its existing userbase.