Will Amazon's Fire Fizzle Out?

So we see another challenger to Apple's (NAS: AAPL) iPad. Although Amazon.com (NAS: AMZN) has managed to shake the market with a $199 price tag for its Kindle Fire tablet, will this turn out to be another also-ran in the cutthroat tablet race? Let's take a look.

Price vs. specs
The first thing about the Fire that pundits are crazy for is its terribly low price -- but if I bought it, I'd be banging my head against the wall, because I wouldn't be able to do half the things I can do on an iPad or Motorola Mobility's (NYS: MMI) Xoom -- which I think is the best Android-enabled tab on the market.

Although the Fire's announcement helped send Amazon's stock north, I expect the euphoria to fizzle out once the tablet hits the shelves. How much can you really expect from 8 GB of memory and an app store that offers one-twentieth of what's on the Android Market? Moreover, the Kindle Fire runs the risk of becoming obsolete next year, when Google (NAS: GOOG) launches the next version of its Android OS. Yes, price matters, but when you get peanuts in terms of capabilities even after paying $200, it doesn't feel all that great.

Stepping into the fire
So is the Fire hype just a case of initial euphoria that will wither away with time? You betcha -- unless Amazon keeps offering users updates and more apps.

Sure, the tablet could be a boon for Amazon's retail sales, as fellow Fool Alex Planes argued. But everything hinges on acceptability. Gadget freaks like me will certainly go for more powerful tabs with a better resolution and loads of other packages. Amazon expects to sell the Fire thinking people will buy it to read books and watch movies, but they forget that people don't buy tabs just to read books, and most people don't prefer watching movies on a low-resolution screen. And will parents really pay $200 this holiday season just for a gadget for their kids to read comics on?

The Foolish bottom line
The price is the biggest weapon in the Fire's arsenal, but people may not mind shelling out more for a better product. If the tablet does take off, can it sustain its momentum? Will Amazon see its top line fatten and make investors happy with this Fire? Or will it just turn out to be a dud like Research In Motion's (NAS: RIMM) BlackBerry Playbook? Add Amazon to your Watchlist, and follow all the action surrounding this new entrant in the tablet wars.

At the time thisarticle was published Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Google, Research In Motion, and Apple.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Google, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.