Well, the race is on.  Finally a product that can challenge the iPad’s # 1 spot: The Kindle Fire.  But is it really?  Analyst predict the Kindle Fire to be the #2 selling tablet in the market.  But it is not a tablet – said Bezos – it is a portal to the cloud.  The main difference between the iPad and the Kindle Fire is the business model.  Yes, my loyal reader (singular) let me explain:

Apple’s business is simple.  Make a kick ass product for $x and sell it for $x+y.  They make money by making cheap things (yes, I said cheap things referring to Apple) and selling them for more.  iTunes is only a way to keep you from buying something else.  Amazon’s business model is making a good product (sorry Jeff, the iPad has you beat) for $x and selling it for $x or even a little less.  They will make money selling you content, you know, books, apps, movies, music, etc. I know what you’re thinking: “so does Apple, have you heard of iTunes?”  hmmm, let’s see.

Apple reported Fiscal 2011 revenue of roughly $108B and a net income of $26B.  This was made of $21B in Mac sales, $7B in iPod sales, a mind boggling $47B in iPhones, $20B in Ipads, $2.3B in peripherals, and a meager (for Apple standards) $6B in iTunes.  On the other hand, Amazon who reported its third quarter a week later has sold $30B in the first 9 months, almost $12 of them in what they call “media”.  In percentage, 6% of Apple’s revenue is iTunes, whereas 40% of Amazon’s is media.  Although the numbers are not directly comparable and Amazon doesn’t distinguish digital from physical media (CDs, DVDs, Books), it is clear that Amazon’s business is heavily weighted in media, whereas Apple’s is mainly hardware, at least for now.

Another way to look at it is that Amazon’s “store front” is the Kindle in all its forms, more comparable to Apple’s stores that to the iPad itself.  Charging $200 for the Kindle Fire is like charging cover to enter an Apple store (kind of what Costco does).  So it is logical to expect that Amazon will not make money on the store front alone since it is really designed to attract customers to by its media products.

Now this is just the beginning of a new Tech rivalry, kind of when Android launched caused Apple to unfriend Google.  iCloud is a direct competitor to Amazon’s media store and Kindle Fire is kind of a competitor to the iPad.  The movie gets more intriguing with all the rumors of Amazon launching free smartphones, again as portals and Apple doubling down on iCloud in iOS5 and beyond.  How will it unfold? don’t miss 2012 – 2015, where 2 of the most revered tech companies go at it cloud to cloud.

But, my dear reader, if you accidentally stumbled upon this blog for investment advice, be forewarned that you’re not getting it.  Apple (AAPL) has$82B in cash and is trading at 14 times earnings. Amazon (AMZN) has $6.5B in cash and trades at around 103 times earnings.  You tell me where would you rather put your money?  Of course, don’t forget one of tech’s fave companies: Google (GOOG) with $42B in cash trading @ roughly 21 times earnings who is about to close the acquisition of Motorola Mobility (MMI) with one of the most impressive IP portfolios in the industry and the capability to develop state of the art hardware and kind of the “inventors” of the cloud.  In other words I’ll wait it out.   I would sell a share and a half of Apple to buy an iPad and a share of Amazon to buy a Kindle Fire and use my free Google account to access both.

The media battle, in this blogger’s humble opinion will be won outside the cloud; on a desk negotiating with media companies that are old fashion and do not understand or particularly care about technology. Better content will win and getting the right terms for the producers is what will be the key.  All 3 have done it and have done it well.  It might just come down to who executes best …

Enjoy.

When there are winners, there have to be losers, even in a rapidly expanding market such as this.  Nokia, the once titan of the category, that robbed market share from the inventors of cellular telephony (Motorola), although still #1 are now falling like a rock.  Palm, who arguably  added the “smart” aspect of smart phones by creating the PIM (personal information manager) elements now ubiquitous, recently bought by HP are now defunct and their legacy, sadly, may follow.  Research in Motion, RIM, makers of the ubiquitous executive gadget of Christmas Past are down to a meager 3% and declining.  While Google and Apple, who dominate the mobile Operating System market share see no end in sight.

Google’s acquisition of Motorola Mobility (MMI) brings to the table the largest patent dowry available:  17000 granted patents plus more than 7000 in process, including some unimaginable radio and communication intellectual property.  This not only gives Google the ability to counter the myriad of lawsuits that make analysts weary of the future of Android, but can actually put them in the driver seat if they weren’t there already.  Unfortunately there are always downsides to every upside.  In this case its in the form of a Taiwanese and 2 Korean companies.  Yes, you guessed it: HTC, Samsung, and LG.  These 3 plus Motorola Mobility are the main adopters of Android and responsible for Google’s rise to the top OS in this category.  Together they represent roughly 25% of the market or about the size of Apple’s iOS.

The question is, my loyal reader (singular), will they pick up their marbles and go home (with a layover in Redmond, Wa)? or will they trust Google to keep MMI running independently?  Yeah right!  Just like other things in life, some win, and some lose.  The ones that win by just waiting it out, Microsoft have a  real chance to become the third horse in the race.  Mainly because they will be the only remaining independent.  But with $53B burning their balance sheet, how long can they afford to stay that way?

Enjoy.

Anyway, Android is now adding true multitask capabilities, a better than ever PND (personal navigation device) performance – with accessories and all – as well as a notification panel that keeps you in control of what you want to be notified about, when, and how. Personalization – which is really tough to do on the iPhone – is what’s new! Of course most contenders will catch up with features, but one has to analyze the cultures behind each device to understand what’s really the key and what markets they will appeal to.

Apple, of course is the “I control everything” culture. I have the best designers in the world, and I have apps, music, and all, so the end-to-end experience is Applesque all the time. Things usually work seamlessly well and when problems arise, they usually get fixed before the people get unrest. I call that the Emperor culture.

RIM, on the other hand is also end-to-end, but it is clearly a messaging centric company. Email is their roots and will never compromise the ability to input text the way God intended it, with a real keypad feel. Its OS is solid, secure, light, and simple to use. A true “Executive” style culture.

Nokia is a mass marketer. A phone for every liking is their strength. How can they have 50% market share otherwise? They have keyboards, touch screens, small, big, medium all colors, etc. This is a bit confusing for power users and it does limit their ability to have a comprehensive set of apps that can cover all those phones. They are a true mass pleaser and not too enthusiastic with the powers; a socialist if you will.

Microsoft, well, what can we say about our friends from Redmond? Are you a PC? then you know what i mean. There are probably more applications written and running for Windows Mobile than any other OS out there (the majority of them are quite nichy – for warehouses, UPS drivers, etc.), since a big number of developers is familiar with the .net framework and the mobile version called Compact Framework (CF) is similar enough in style. When more than one app is running at the same time they tend to step on each other. Unfortunately, most don’t work well, the OS has to be rebooted a couple of times a week, and it takes forever to start, especially if you have lots of apps. True Anarchy!

Android is different because Google is different. Each manufacturer that uses Android will have the ability to tailor the phones to their brand and service provider. Google will provide some common elements and APIs to minimize chaos. They will manage the app store which in a way will help apps run across products in a slightly more organized fashion. Of course, not every device will be perfect, but they will all live in harmony. Users will perceive commonalities giving them the “Googlesque” identity but each with its own personality. Just like a democracy.

Of course, Democracies have prevailed throughout the course of history and some lucky monarchies have survived if nothing else for the amusement of the tourists.

Enjoy.