Amazon Looking Long in New Tablet Wars
The company's new product doesn't have to be an iPad-killer -- yet.

All we know for certain is that Amazon (NASDAQ:AMZN) is hosting a press conference Wednesday. It’s in New York and starts at 10 a.m. EDT. But in the leaky-sieve that is the Internet, word has leaked out: Amazon is likely to announce a major upgrade to the Kindle, an iPad-like tablet being called the Kindle Fire.

But few investors seem to be willing to buy on the rumor. On Tuesday, a day when the Nasdaq Composite closed up 1.2%, Amazon closed down 2.5% at $224.21.

Perhaps it’s that investors simply don’t trust the speculation on tech blogs, which frequently contradict themselves with rumors of coming devices. Or conversely, perhaps it’s the very details of that speculation, such as the reports the Kindle Fire will be based on technology used in Research In Motion’s (NASDAQ:RIMM) Blackberry Playbook, an ill-starred tablet. Or that the Kindle being announced on Wednesday is simply a warm-up act for a much snazzier Kindle Fire to be revealed in early 2010.

If Amazon does unveil a Kindle Fire, the single most important data point among all the spin and pomp will be this: how much does it cost? Reports from tech sites and securities analysts alike suggest a price tag between $250 and $300. If that’s the case, the Fire could have an impact not only on Amazon shares, but on the stocks of other companies, too.

A $250 tablet from Amazon has a strong potential to be disruptive to the emerging tablets market. Many consumers are intrigued by iPads, but can’t bring themselves to spend $500 or more on one. In the same way as the original Kindle’s $139 price tag made the device a surprise best-seller, the Kindle Fire could bring tablets in to many more homes.

Apple (NASDAQ:AAPL) and Amazon have radically different approaches to tablets and content. Apple runs its iTunes online media store at a slim profit to sell more iPhones and iPads. It costs Apple an estimated $300 or so to sell an iPad, which it then retails for $499 or more. Apple makes hundreds of dollars per iPad, much of which goes to the bottom line.

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