Apple 2.0

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Forrester: Amazon's tablet will bury the iPad

August 29, 2011: 3:36 PM ET

"A year from now," it predicts, "'Amazon' will be synonymous with 'Android' on tablets."

Source: Forrester

The last time I looked closely at a research report from Forrester's Sarah Rotman Epps I took her to task for predicting in June 2010 that total U.S. tablet sales from all manufacturers that year would be a modest 3.5 million -- despite the fact that Apple (AAPL) had already sold 2 million iPads worldwide in the previous two months. (See Forrester: iPad sales will plummet.)

"Consumers didn't ask for tablets," she wrote at the time. "In fact, Forrester's data shows that the top features consumers say they want in a PC are a complete mismatch with the features of the iPad."

Apple, of course, went on to blow Epps' dour prediction away, selling 14.79 million iPads worldwide in 2010 and another 12.6 million in the first six months of 2011.

Now Epps is back to say that Apple has met its match:

"Enter Amazon.com," she writes in a report released Monday, "whose tablet can compete on price, content, and commerce. If it's launched at the right price with enough supply, we see Amazon's tablet easily selling 3 million to 5 million units in Q4 alone, disrupting not only Apple's product strategy but other tablet manufacturers' as well."

Note that 5 million Amazon (AMZN) tablets is considerably more than the 3.27 million iPads Apple sold in its first quarter.

Epps is hardly the first analyst to argue that Amazon's forthcoming (as early as October, she says) Android-powered tablet is the only competitor that stands a chance of overtaking the iPad. It's practically conventional wisdom.

But Epps' commentary -- with talk of war and roach motels -- is particular pungent. Among the highlights: (I quote)

  • So far, non-iPad tablets have been like residents of a "roach motel" — they go in (to the channel), but they don't come out.
  • Not only does Amazon have the potential to gain share quickly but its willingness to sell hardware at a loss, as it did with the Kindle, makes Amazon a nasty competitor.
  • Apple sells software and services, but the lion's share of Apple's revenue still comes from hardware, which makes it vulnerable to a company, such as Amazon, that isn't seeking profit from hardware sales.
  • If product strategists at OEMs such as Acer, Lenovo, and Toshiba see Amazon tablets flying off the shelves, they'll want to make one, too.
  • A year from now, "Amazon" will be synonymous with "Android" on tablets.

If Apple has to "prepare for war," she says, they have only themselves to blame. "Product strategists at Apple ... fired the first shot" by changing the App Store rules and making it harder for Amazon to sell books on Apple's devices.

Epps' findings are summarized on her Forrester blog. The full report can be had here for $499.

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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