Tue, 30 Aug 2011 Amazon tablet 'is first true iPad challenger' - Forrester

Within a year, Amazon will be a major player in the tablet market, second only to Apple's iPad, a major research firm predicts. Not only will Amazon ship millions of its still-unannounced Android-based slate, but third-party manufacturers will sell a variety of "Amazon tablets" that feature the online retailer's software and services.

This bit of soothsaying is courtesy of Forrester Research, which has just published a new report on how Amazon will quickly become Apple's biggest competitor in the tablet space.

Amazon reportedly is readying an Android tablet that may cost "hundreds less" than the iPad, and may launch the product this fall, according to recent rumors. As Forrester sees it, an Amazon-branded slate priced below $300 (about £185) would be a huge hit--selling 3- to 5-million units in the fourth quarter alone, assuming Amazon has enough supply to meet demand.

Apple iPad Still Number One

Amazon's tablet success won't challenge the iPad's dominance, however. Forrester analyst Sarah Rotman Epps, in a blog post, points out that Apple has sold nearly 29 million tablets thus far and "looks invincible."

But Amazon's retailing prowess will allow it to gain a sizable chunk of the market quickly, something other tablet makers have yet to accomplish.

"Even though Amazon taking on Apple is a bit like David taking on Goliath (compare the market cap, profits, and cash position of the two companies), Amazon's willingness to sell hardware at a loss--combined with the strength of its brand, content, cloud infrastructure, and commerce assets--makes it the only credible iPad competitor in the market," Epps writes.

How Amazon Will Do It

Unlike Apple, which earns most of its income from hardware sales, Amazon isn't seeking a profit from hardware, Forrester says. The retailer could sell its slate as a loss leader, but still profit by directing its tablet users to Amazon services and software. This strategy would likely strain the already shaky Amazon/Apple relationship.

Other Android manufacturers may also overlay Amazon's software on their tablets to provide a "richer customer experience"--assuming, of course, the Amazon-oriented interface is superior to plain-vanilla Android or other OS skins.

If consumers flock to Amazon tablets, developers will soon follow. Retailers, banks, and media and software companies will quickly build apps for the Amazon slates, thereby reducing Apple's advantage in the apps race.

Apple says there are more than 100,000 iPad apps, whereas Google's Honeycomb platform has less than 300, Forrester says.