Amazon's Kindle Becomes Apple iPod For Books? Or Better?

Posted By: Jim Goldman

Source: Amazon.com Kindle 2

This is a big day for Amazon [AMZN 66.64 -0.07 (-0.1%) ] and its legions of Kindle fans who were shut out for the past couple of months if they were trying to buy one of those new electronic book readers that have been sold out everywhere. Today's Amazon announcement of the new and improved Kindle might be the tech industry's worst kept secret, but at least we now know some of the new specs, and why some key analysts on Wall Street seem so excited about this device.

The new $359 version will ship in a couple of weeks, and will be "thinner, faster, crisper with longer battery life," and capable of holding 1,500 complete, electronic books. It weighs just over 10 ounces, and is about a third of an inch thick, and will boast 16 shades of gray instead of the 4 shades that came with the original version. The company also wants to make books available in less than 60 seconds, wirelessly, from anywhere you happen to be. The longer battery life means readers can read for 2 weeks on a single charge.

"We've included an onboard dictionary so you can look up words on the fly," says Jeff Bezos, Amazon's CEO, at this morning's event in New York City. "I love the Kindle. It's a gate-way drug. I'm reading more," he proclaims. "I've read an astonishing number of books."

The Kindle 2.0 already enjoyed pop culture's ultimate stamp of approval when Oprah herself proclaimed the device in its first version as the greatest product she's ever seen. That episode of the program, featuring Bezos himself, led to instant sell-outs of the device and a long, long wait for customers. Pent-up demand now promises big-time sales once again and the company is taking pre-orders now.

Last week, Amazon got quite a boost when Citigroup's Mark Mahaney dramatically increased his Kindle sales estimates. Back in August, he suggested the device would sell 378,000 units in 2008, about double his initial estimates. In his most latest note, Mahaney now estimates that the Kindle sold a half million units instead, and speculated that the Kindle could generate $1.2 billion in revenue, or 4 percent of Amazon's business, by next year. Juicing revenue by 10-fold, going from roughly $150 million in revenue this year to over $1 billion next year, is no small feat. He also says that if Kindle hadn't sold out toward the end of 2008 -- and Amazon hadn't stopped building the older generation model to prepare for this newest version, that the company could have sold 750,000 units.

Barclays estimates $700 million in revenue and more than $100 million gross profit by 2012. Sanford C. Bernstein is a little less sanguine, anticipating 750,000 units sold this year, calling Kindle a niche product that'll unlikely impact 2010 EPS significantly.

Still, even if these range of numbers is the ballpark for Kindle sales, then the device is outselling those early versions of Apple's iPod by about 30 percent. That too is no small feat. I'm not saying that Kindle sales can sustain the growth they're seeing now, so that this thing actually overtakes iPod sales, but it sure seems like a compelling start for the little book-reader that could. Signing Stephen King, in much the same way Apple [AAPL 101.56 -0.95 (-0.93%) ] signed U2, is also a sign of the electronic book's times, with the author preparing to release his next novel exclusively on the Kindle first, and then going to a Simon & Schuster hard copy version later.

Nothing is preventing Apple from adding books to its iPod line, though the tiny screens, even on the Touch, may preclude a book's success on that device. Meantime, as Amazon continues to generate excitement with the Kindle, Sony [SNE 20.02 -0.42 (-2.05%) ] is trying to hitch its wagon to the eBook gravy train with its $299 Reader and Google [GOOG 373.12 -5.65 (-1.49%) ] now offers an electronic book search with 1.5 million titles in a new app available for Apple's iPhone. Electronic books as a movement is happening and Amazon is establishing itself as the go-to vendor for the cool device that brings them to you. And as I've written before, don't underestimate the power of the Oprah touch.

There's also something to be said for a device that does one key thing, and well. I love the concept of smart phones, that let me listen to music, watch videos, play games, e-mail, web surf, and oh, make phone calls, too. But with limited battery life, I'm usually sacrificing one task at the expense of the others, and I hate burning battery time by "playing" only to be left scrambling for a charger when I need to make a call or send a note. That alone makes the Kindle an easy sell. And Amazon knows it.

And apparently, so do consumers. Kindle's evolution will be fun to watch.

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