Amazon targets iPad with its Kindle Fire

Amazon is taking on the untouchable iPad with a touch-screen tablet of its own.

The company on Wednesday introduced its entry in the rapidly expanding market for handheld computers — a device called Kindle Fire that connects to the Web, streams movies and TV, displays e-books and supports thousands of apps.

It's half the size of an iPad and will be less than half the price when it goes on sale Nov. 15. Amazon is offering the Kindle Fire for $199. The bare-bones iPad sells for $499, the most expensive for $829.

Of course, competing with the iPad won't be as easy as swiping a finger.

Analysts at one research firm, Gartner Inc., say three of every four tablets sold this year will be iPads. Apple sold almost 29 million of them from April 2010 through June of this year.

Amazon sells more than 1 million e-books, 100,000 movies and TV shows, and 17 million songs. It hopes it will succeed where other companies have failed because the tablet is designed to tap into Amazon's massive storehouse of media content.

"The reason they haven't been successful is because they made tablets. They didn't make services," CEO Jeff Bezos said in an interview.

Bezos unveiled the Kindle Fire at a New York media event that was stage-managed much the same way Apple choreographs its product launches. He walked a stage extolling the product while technology sites live-blogged the event.

The CEO also introduced three versions of its popular Kindle e-reader, all with black-and-white screens — a basic model for $79, a touch-screen version for $99 and a touch-screen with 3G wireless service for $149.

Those devices will further pressure competitors like Barnes & Noble as they try to break Amazon's dominance in electronic book sales.

The Kindle Fire's size, with a screen that measures 7 inches diagonal, makes it a close match to Barnes & Noble's Nook Color tablet, which came out last year. But while Barnes & Noble sees the Nook Color as a jazzed-up e-reader, Amazon has broader goals for the Fire as a platform for games, movies, music and other applications.

All that content makes the Fire the only credible competitor to the iPad this year, said Sarah Rotman Epps, an analyst with Forrester Research.

"In theory, Sony could do something similar, but they haven't and it doesn't look like they will," she said. "They have a tablet, but they only went halfway on the services."

Sony started shipping its first iPad-style tablet two weeks ago. It's linked to the company's music and movies stores, and the capability for some PlayStation games will be added later.

Analysts had expected the Fire to sell for about $250. Epps called the $199 price "jaw-droppingly low" and said it would be tough competition not just for Apple but for contending tablet makers such as Samsung, Motorola and HTC.

Analysts had speculated that Amazon would sell the tablet at a loss, counting on making back some money through book and movie sales. Bezos said that isn't the case but that the company is happy with a slimmer profit margin than other manufacturers.

"We want the hardware device to be profitable and the content to be profitable. We really don't want to subsidize one with the other," Bezos said.

Epps said she believes Amazon could sell as many as 5 million Fires by the end of the year but will probably sell closer to 3 million because it's coming out so late.

The Fire will run a version of Google's Android software, used by other iPad wannabes, and will have access to apps through Amazon's Android store.

Unlike competing tablets, it will not have a camera. Bezos said the camera would be superfluous because practically everyone has one in their phone anyway.

It also lacks a microphone and a slot for memory expansion, common features on other Android tablets. The Kindle Fire will run on Wi-Fi networks but will not connect to cellular networks, as some iPads and many Android tablets can.

Bezos said he doesn't see the Fire as eventually replacing the Kindle, which is exclusively for reading.

"What will happen is people will buy both. Because they're really for different purposes," he said.