Amazon.com Inc will launch a tablet computer this year to extend its position as the world’s largest Internet retailer, expand in mobile commerce and sell more digital goods, according to analysts and investors.
Amazon plans to introduce a tablet with a 9-inch screen before October that will run on Google’s Android operating system, the Wall Street Journal reported on Wednesday, citing unidentified people familiar with the matter. An Amazon spokeswoman did not respond to requests for comment on Wednesday.
Analysts and investors have been expecting a tablet from Amazon for several months. The company’s shares hit a record high earlier this month, partly on optimism about the new device, R.W. Baird analyst Colin Sebastian said.
“Amazon’s brand, user base and digital media offering would position a tablet well against some of the other options out there,” Sebastian said. “Tablet users tend to purchase more digital items than comparable physical items, so Amazon wants more exposure to that.”
At least 1.5 million Amazon-branded tablets are being built for the third quarter and the target for this year as a whole is 4.5 million to 5 million units, computer hardware analysts at Canaccord Genuity wrote in a recent note to investors.
The move will increase competition between Amazon and Apple Inc, which makes the top-selling iPad tablet and also sells digital books, music and video through its iTunes service.
“In the tablet market, the No. 2 player will be Amazon,” said Mark Gerber, director of technology research at Detwiler Fenton. “None of these other tablets have really taken off.”
Motorola Mobility’s Xoom and Research in Motion’s PlayBook have struggled partly because the tablets are not clearly connected to content, Gerber said.
In contrast, the iPad is intertwined with iTunes, where users can buy music, videos and digital books.
Amazon already has lots of content that tablet users will be able to access, including Kindle ebooks, music downloads and videos to buy, rent or stream.
Gerber said Amazon’s tablet may come with free access to the company’s video-on-demand streaming service for at least an introductory period.
In March, Amazon launched a Cloud Drive service that lets customers store files on its servers. In the same month, it also unveiled an Appstore for Android smartphones and tablets, getting it into the business of selling games. Both moves put it in closer competition with Apple, which offers similar services.
Gene Alvarez, who analyzes Amazon strategy at Gartner, sees the Appstore as a precursor to a tablet from the company.
While Amazon is encroaching on Apple’s turf, Alvarez and others said the online retail giant was launching a tablet for different reasons.
Apple offers content to drive sales of its gadgets, while Amazon wants a tablet to get customers to buy more of its other products.
The strategy of having a device that encourages more buying is something that Amazon has already pulled off successfully, Barclays Capital analyst Anthony DiClemente said.
Amazon announced earlier this year that it was now selling more digital books than physical books, and DiClemente said the company’s Kindle reading device was the catalyst for that shift.
Amazon’s tablet has the potential to do the same for other products the company sells, he added.
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