Can Apple Light Amazon's Fire?

There's no catching up to Apple (NAS: AAPL) in the tablet space, but one analyst thinks that (NAS: AMZN) is going to sell a lot of Kindle Fire devices this year.

Pacific Crest analyst Chad Bartley is raising his target on Amazon's entry-level tablet. He now sees the world's leading online retailer selling 14.9 million of its $199 gadget, up from an earlier estimate of 12.7 million units.

Obviously, this isn't going to close the gap on Apple. The class act of Cupertino sold a pulse-quickening 15.4 million iPads this past quarter alone. However, it's a pretty bold uptick for an analyst who isn't bullish on Amazon.

Bartley's bump is based partly on a consumer survey that his firm conducted to gauge tablet preferences heading into last year's holiday season. An encouraging 30% of consumers who were planning to buy a tablet this past December were going to get a Fire. Thirty-eight percent were set on the iPad 2. His channel checks show Amazon moving around 2.4 million tablets this quarter.

Bartley also may be moving his Fire targets higher if Amazon rolls out a new Kindle Fire -- as well as a larger iPad-sized model -- this summer. He sees that happening, though Amazon will have to be careful on pricing. If it thinks it can price its 9-inch tablet at $299 or so and clean house, it may have another thing coming. What if Apple drops the price of the iPad 2 to $349 or $399 when it rolls out the iPad 3 in a few weeks, as some analysts expect?

We also can't discount the hungry competition. Research In Motion (NAS: RIMM) is back to selling its fledgling PlayBook tablets for as little as $199 through at least the end of this week.

What's good for the Kindle Fire isn't good for Amazon's bottom line in the near term. It's widely believed that Amazon is selling the small tablets at a loss to gain market share, and Bartley raising his unit target also means lowering Amazon's profit estimate. Bartley is increasing his top-line forecast to $64.42 billion, while slashing his profit projection to $1.45 a share from $1.56 a share.

An interesting tidbit in Bartley's report is that he's also cutting this year's forecast of traditional Kindle e-book reader sales from 28.6 million units to 24 million units. This is going to be bad news for Barnes & Noble (NYS: BKS) unless it too is making that up in Nook Tablet sales.

Farewell, e-reader; hello, tablet? It's going to be an interesting year.

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