Can Amazon’s $199 Kindle Fire give iPad a run for its money? Rather than set Apple’s touch computer ablaze, the Fire will instead benefit California-based gadget designer by introducing to tablet computing people who otherwise would never consider a tablet. And after purchasing and enjoying their Fire for some time, some of them will likely upgrade to an iPad, J.P. Morgan analyst Mark Moskowitz wrote in a note to clients this past Friday. In other words, the Fire is a “gateway drug”:
In our view, Apple appeared confident in its position of strength in the tablet market continuing. We believe that Apple is not too concerned about the low-priced entrants. If anything, we think that Apple views the Kindle Fire as a device that stands to bring incremental consumers to the tablet market, and here, these consumers could gravitate to more feature-rich experiences. In other words, we think that Apple is not seeing much pressure from lower-priced tablets, yet.
Similarly, he dubbed the free iPhone 3GS “a good dynamic” for the iPhone family because, as Apple told him, it introduces the company’s products to a wider audience. Surveys tell us people predominantly want either Apple’s or Amazon’s tablet and Moskowitz’s thinking jives with Evercore Partners’ Robert Cihra (who isn’t terribly reliable), via Fortune’s Philip Elmer-DeWitt:
While Amazon’s Kindle Fire has come out of the gates strong, as expected, we see Apple maintaining its competitive lead, if anything accentuated by what now looks like the only tablet to so far mount any credible iPad challenge apparently needing to do so by selling at cost; not to mention Amazon’s success may just vaporize other “for profit” Android tablet OEM roadmaps (e.g., we est Amazon 50% of all Android tablets in CY12). Meanwhile Apple goes on as the only vendor able to cream off the most profitable segment of each market it targets, whether tablet, smartphone or PC.
Moskowitz and other analysts met with Apple CEO Tim Cook and finance boss Peter Oppenheimer to talk business. Moskowitz walked away from the meeting “confident” that Apple will continue delighting users will feature-rich experiences. Reiterate their Overweight rating on Apple and a price target of $525 per share and raised his December quarter iPhone estimate from 25 million to 28 million units.
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