5 Things You Need to Know About Amazon's New Tablet

The Amazon.com (AMZN) tablet is finally happening.

The leading online retailer showed off its Android-powered device this morning. Kindle Fire should be a hot -- pardon the pun -- item this holiday season, but let's go ahead and break this down into five important takeaways, as you ponder the decision to buy or pass on Amazon's latest gadget.

1. It's cheap
It was widely assumed that the tablet would be priced somewhere between Barnes & Noble's (BKS) $250 Nook Color and Apple's (AAPL) $500 iPad 2.

Amazon is shocking the market with a $199 price tag. It's not fancy. It doesn't come with a camera or a microphone. However, it's ridiculously cheap even for a rudimentary tablet. Instead of simply leaning on its brand and marketing muscle to push out a device to compete with the $250 Nook Color, Amazon is blowing Barnes & Noble out of the water.

2. It's small
Steve Jobs has famously referred to devices with screen sizes between 5 inches and 7 inches as "tweeners." They're too big to be pocket-friendly smartphones. They're too small to be multimedia-friendly tablets.

Kindle Fire's 7-inch screen is going to be small for those used to the iPad's nearly 10-inch screen, but it is larger than the traditional Kindle's 6-inch screen. It's still a lot of bang for the buck, and supply chain watchers have been pointing to Amazon releasing a larger 10-inch version early next year.

3. It's flexible
Some analysts are already tagging Amazon's tablet as Apple's biggest competitor for 2012 -- and that was before the mainstream-gunning $199 price became public this morning.

Tablet manufacturers that have tried to go big on specs -- and price tags -- have fallen flat against the iPad. Amazon is going smaller and more bare-boned, but it's a lot more flexible than its shortcomings would seem to suggest.

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For starters, beyond the obvious Kindle bookstore connection, Kindle Fire also plays nicely with Amazon's digital music and video storefronts.

Video will be a big winner here, since Amazon is including a 30-day free trial of Amazon Prime -- it's a $79 a year service that provides free two-day shipping and subsidized overnight deliveries on any Amazon-warehoused merchandise.

A key element of Prime is access to Amazon's growing catalog of streaming movies and videos at no extra cost. In other words, if you buy a Fire you'll have Wi-Fi access to what is now 11,000 titles for the first 30 days (and beyond for those who are or will become paying Prime members).

For those seeking fresher content, 100,000 digital videos and 17 million digital songs are available for purchase, and it all plays into Amazon's growing cloud-computing platform.

4. It won't be as easy to get as you think
With the rush to get a tablet out before the telltale holiday shopping season, many believe that there won't be enough production to keep up with demand. The original Kindle had this exact problem four years ago. Amazon was quick to brag about selling out within hours of its launch, but in reality it was because only a small number of the early e-readers were actually available to sell.

We'll see how this plays out.

Amazon claims to be ready this time. "We're making many millions of these, but I still recommend you preorder today," CEO Jeff Bezos suggested during this morning's rollout.

No matter how anxious you may be to get your hands on this $199 device, you will have no choice but to wait. It won't begin shipping until mid-November.

5. It may pay to wait
Scarce supply and ample demand may find buyers scrambling to resale markets, but don't overpay on eBay just yet.

Some reports circulating this week are suggesting that the rush to have a cheap tablet out in time for this holiday season is just a placeholder. A better version may come out early next year. There's an even stronger possibility of a 10-inch model, for those who want a more iPad-sized tablet experience.

Amazon also has a history of slashing prices on the Kindle e-reader. It debuted at $399 four years ago. There have been several price cuts along the way, and today the non-touch Kindle e-reader has come all the way down to as little as $79.

Don't expect such drastic price cuts this time around. Amazon knows that you only get one big swing at the tablet market, which is cornered by Apple. The $199 price is compelling enough that Amazon won't need to nibble away at its margins to deliver even cheaper Kindle Fire units in the near future.

The price may not change, but better -- and likely pricier -- versions may be coming soon. Unless you want to wait for what may or may not materialize next year, following Bezos's advice to preorder one now is probably the best call.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.

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