Kindle Fire sales to hit 5m this quarter

Kindle FireOrders for Amazon's Kindle Fire tablet computer are reported to be running at 50,000 units per day, prompting analyst JP Morgan to predict sales of between 4.5 and 5m in the first quarter it goes on sale. That's something of a turnaround for the firm, which had dismissed the tablet's chances of making a significant impact because of its price and the fact that it lacked a full set of features. It had dubbed it "an unimpressive stepping stone".
The Kindle Fire is due to ship in the US on November 15 and reports are that vendors are experiencing a steep rise in demand as that date approaches. Sales of 5m would be pretty impressive, but still some way short of the 11.1m units Apple sold of its iPad tablet in the most recent quarter.

But while the Kindle Fire does represent the first real potential challenge to Apple's dominance of the tablet market, it's perhaps not entirely accurate to see Amazon's device as a head-to-head competitor. That's perhaps the mistake JP Morgan made in its first analysis.

The fact that the Kindle Fire does not have the range of features available on an iPad does not seem as important to consumers as the fact that, for $199, it is a very attractive price point for a media consumption device. And if Amazon can resolve the copyright issues that have so far prevented the device being made available in Britain, the attraction can only grow.

Amazon revenue

What's also interesting to consider is the fact that, according to industry estimates, Amazon will lose $50 on each Kindle Fire it sells. That suggests it sees content as central to future revenue, with device sales helping to fuel demand that consumers will be willing to pay for.

Ironically, high device sales could initially result in lower earnings as that loss-leading $50 per device stacks up. And that means Amazon could come under greater pressure to provide more and clearer information on how its entire range of Kindle devices is selling. Currently, it doesn't disclose the figures.

All that feeds into the issue of confidence on the financial markets. Mark Mahaney of Citi told specialist site AllThingsD: "There is the distinct possibility that an aggressive/successful Fire launch could materially negatively impact Amazon's margins and earnings per share near-term."
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