Amazon.com, Inc. (NASDAQ:AMZN) Undercuts Apple Inc. (AAPL) With $50 Tablet

Amazon.com Inc. stock surprise

Amazon.com, Inc.  is planning to release a $50 tablet to coincide with the holiday season, according to a Wall Street Journal report. The tablet will come with a 6-inch screen and mono speaker, and will be among the least-expensive tablets available.

Amazon Minion Shipping Boxes

Amazon’s cheapest current tablet is the Fire variant, which has a 6-inch screen and retails for $99. It includes advertisements that are displayed as screen savers. The ad-free version costs $114. The Wall Street Journal report, released late yesterday, did not state whether the $50-tablet will include ads.

Amazon Outsourced Work to Keep Costs Down

Last year, analysts blasted Amazon.com, Inc. for pricing its Fire smart phone in the iPhone range. Despite enticing with a free one year $99 Prime membership, the phone’s sales fizzled. The online retailer was forced to cut prices but consumers weren’t impressed. Finally, in October, Amazon had to take a $170 million write-down for unsold inventory.

After the Fire phone debacle, Amazon re-organized its hardware-development centre and laid off a large number of engineers who worked on the handset. This time, to lower costs for the 6-inch tablet, Amazon has outsourced much of the developmental work, according to sources close to the company.  The outsourced firms include China’s Shanghai Huaqin Telecom and Taiwan’s Compal Communications. Compal had previously worked with Apple and Hewlett-Packard.

Will the Low Cost Gambit Pay?

According to people familiar with the matter, Amazon.com, Inc. is targeting buyers looking for a simple device that can do straight forward tasks like streaming videos and online shopping. But prior experience has shown that such inexpensive tablets usually have to compromise with screen quality or battery life. This is evident from the fact that the $50-tablet will have mono speaker instead of stereo, which is a basic standard feature.

Amazon is staring at potential new challenges from Apple Inc.  and Samsung. The Street is abuzz with rumors that Apple will introduce new versions of its popular iPad and iPad Mini as early as Wednesday. The tech giant is also said to be working on a super-sized iPad Pro, which could have a 12.9 inch screen.

Samsung tried to steal Apple Inc. ’s thunder by providing a teaser of an extra large tablet at its Gear S2 event at IFA, Berlin. Other than an image of a plain black tablet with a foldable stand, the South Korean firm did not reveal any further details. But promised a ‘closer look in October.’

The tablet market has been in a state of decline for the last 2 years. IDC figures showed that second quarter sales were down 7 percent from the same period last year. Apple Inc.  and Samsung dominate the premium U.S. tablet market with a combined 42 percent market share.  Let’s see if Amazon.com, Inc. manages to lure consumers with its newest offering.

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