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Amazon Cuts Kindle Prices

Read MoreHide Full Article Inc. (AMZN - Free Report) recently slashed the price of Kindle Fire high-definition (HD) 7 inch tablets in the U.S. and U.K. 

Amazon has always been very competitive and in the current environment, where competitors like Barnes & Noble and H-P are cutting prices, it is only expected that Amazon would follow suit. The company usually upgrades once a year, so the price cut should also help inventory clearance ahead of the new announcement.

The company stated that the 16 GB model will be available at $169 instead of $199. The 32GB model is now priced at $199, down from $229 earlier. In the U.K., the 16GB model is available for £139 while the 32GB variant is priced at £159. 

A few days back, Amazon also slashed the price of its 8.9 inch Kindle Fire HD tablets across the U.K., Germany, France, Italy, Spain and Japan. The Kindle Fire HD 8.9 inch tablet is now available in the U.S. for $269 instead of $299 while the price of the 4G version has come down to $399 from $499.

The Kindle Fire HD 7.0 inch is used for web browsing, email, gaming, streaming TV shows and movies, reading e-books and more. It comes with IPS technology and runs a forked version of Google's Android OS (Wikipedia). For Amazon, the Kindle is more than a product generating revenue. Its more important function is to serve as a platform for the sale of digital goods. Amazon is a very big player in this segment and while it started out in the digital book segment, it is now a major player in the video segment as well.  

Even if Amazon does not make big money from tablets, it intends to 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.

Amazon 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 - Free Report) leads the race so far with record shipments of its iconic iPad. However, Amazon’s lower-priced Kindle Fire has also witnessed strong demand. Other players like Google Inc. and Microsoft Corp. (MSFT - Free Report) have also stepped in to grab a share of the pie.

Amazon is one of the leading players in the extremely fast-growing retail e-commerce market. While the strong growth prospects are making the market more competitive by the day, Amazon continues to maintain and even grow its share on the back of its consistent and reliable services. Amazon’s scale of offerings, its broad reach and platform approach are key to its success.

In the first quarter of fiscal 2013, Amazon reported revenues of $16.07 billion, down 24.4% sequentially but up 21.9% from the year-ago quarter. This was in line with management's guidance of $15.0–$16.6 billion (down 25.7% sequentially but up 19.8% year over year at the mid-point). Reported revenues narrowly missed our expectations. Year-over-year revenue growth was 24% excluding unfavorable currency impact.

Amazon currently has a Zacks Rank #2 (Buy).

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