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Amazon’s New Kindle Fire Offers Tough Competition To Nexus 7: GS

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Amazon's New Kindle Fire Offers Tough Competition To Nexus 7: GS

Amazon.com, Inc. (NASDAQ:AMZN) announced its new devices yesterday, including the three new Kindle Fire HD SKU, and the Kindle Paperwhite eReader with improved features and specifications. The new Paperwhite eReader has a sharper display and a 8 week battery life. The two SKUs will sell for $119 and $179, while you can get yourself the old Kindly at only $69. The three Kindle Fire HD SKUs prices on the other hand range from $199-$499.

According to Goldman Sachs Group, Inc. (NYSE:GS) equity research, the new line of tablets brings added potential for the company’s earnings, and the report reckons that the second half of 2012 forecasts could be pretty good for Amazon.. It is estimated that 2.3 million units of Kindle could be sold during the second half of 2012, while Kindle Fire devices could attract volume sales of 8.8 million.

Amazon's New Kindle Fire Offers Tough Competition To Nexus 7: GS

The Equity research team at Goldman Sachs Group, Inc. (NYSE:GS) is of the opinion that the new improved gadgets puts Amazon.com in a pole position to compete with Google Inc. (NASDAQ:GOOG)’s Nexus 7 tablet, along with other android tablet devices that have similar specifications. A majority of the new Kindle Fire gadgets will retail at similar prices to Nexus 7.

Additionally, the analysts believe that admirers of the larger tablets will be moved by the 9″ Kindle Fire HD, especially those who do not find value in the $200 premium on Apple Inc. (NASDAQ:AAPL)’s larger screen and iOS ecosystem, 16GB  iPads.

Dolby Digital Plus SKU is also expected to benefit from the announcement, as Goldman expects it realize higher ASP versus the Kindle Fire, which also has the AAC technology.

Illustratively, if the Q4 forecast on Kindle Fire of $7.5 million units projected by Goldman Sachs Group, Inc. (NYSE:GS) is to be met; a factorial growth rate of 30% year on year, for 2013, would result in 13.6  million units for the FY results. Therefore, Dolby Digital could be set to record $1-2 million dollars in licensing revenue, equivalent to $0.01 Earnings Per Share  for the full year  in 2013.

Despite these projections, Goldman Sachs Group, Inc. (NYSE:GS) believes that Dolby Digital’s Consumer Electronics and Computer Segment units still face a major challenge in secular shifts, saying, “while the use of Dolby Digital Plus on a $199, $299 tablet may suggest a“minimum requirement for higher priced tablets, in our view the use case for premium sound on a mobile device is still debatable.”

“Moreover, we continue to see the secular shifts impacting Dolby’s Consumer Electronics and PC segments (particularly given HP’s comments around a very weak PC end demand, especially in the consumer segment).” the report concludes.

Amazon has indeed revealed everything that its anxious consumers were waiting to hear, unlike its counterparts in the technology industry, Nokia Corporation (NYSE:NOK), and Motorola Solutions Inc. (NYSE:MSI), which could not reveal the pricing of their products, as covered in our recent post.

The Internet based e-commerce giant also revealed its new venture into sporting goods, as covered in our article yesterday, which it will conduct via its site Afterschool.com, that is expected to launch soon. These are two new sets of challenges for the company going into the all important period of Q3,  and it will be interesting to see how these impact on its Q3 results next month.

Yesterday Amazon.com, Inc. (NASDAQ:AMZN) closed at $251.38 per share, up $5.16, or approximately a 2.1% increase from the previous close.


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