Amazon Kindle Fire HD to Cost Less

Amazon.com Inc. (AMZN - Analyst Report) slashed the price of Kindle Fire high-definition (HD) 8.9 tablets in order to make the device more affordable and thrive in the highly competitive environment. The online retailer also announced the availability of its 8.9 inch Kindle Fire HD tablets across the U.K., Germany, France, Italy, Spain and Japan.

The company stated that the WiFi version of the Kindle Fire HD 8.9 inch tablet will now be available in the U.S. for $269 instead of $299 while the price of the 4G version will come down to $399 from $499.

The Kindle Fire HD 8.9 inch is a large-screen version of Amazon's Kindle tablet used for web browsing, email, gaming, watching TV shows, reading magazines and more. It comes with dual band Wi-Fi connectivity and MIMO technology that speeds up video streaming and downloading. The device also includes an upgraded version of Immersion Reading that allows the user to hear narration by a popular actor while reading a book.

The company entered the tablet market with the shipping of Kindle Fire in late 2011. The tablet market is getting more competitive by the day. Apple Inc. (AAPL - Analyst Report) leads the race so far with record unit shipments of its iconic iPad but Amazon’s lower-priced Kindle Fire has also seen very strong demand. Other players like Google Inc. (GOOG - Analyst Report) and Microsoft Corp. (MSFT - Analyst Report) have also stepped in to grab a share of the pie.

Though Amazon’s unit sales are far behind Apple’s iPad and Samsung Galaxy tablets, we believe that the lower rates will definitely create a price war in the tablet market and will continue to pressure the high-volume Android OEMs like Samsung, ASUS and even Google.

We view Amazon’s expansion into the tablet market as a defensive move, designed to protect its leading share of the e-reader market and maintain sales of books and other digital products through the Kindle platform. Even if Amazon does not make big money from tablets, it will increase the number of customers buying both physical and digital products from the company, such as movies, music, games and apps, thus increasing its revenues.

At the same time, we think there is a certain amount of uncertainty regarding Amazon’s investment plans, which could continue over the next few quarters. While it is true that these investments are going to drive the next phase of its growth, near-term earnings will remain under pressure.

Amazon currently retains a Zacks Rank #3 (Hold).