By Danielle Kucera
Amazon.com Inc. is updating the Kindle Fire in a bid to stoke consumer demand as Google Inc. and Microsoft Corp. crowd the tablet market with competing devices.
The newest version of the Kindle Fire will cost $159 and have a 7-inch screen, the same size as the current model, the company said at an event today in Santa Monica, California. Amazon also unveiled a Kindle Fire HD with an 8.9-inch screen.
Chief Executive Officer Jeff Bezos is retooling the Kindle Fire to revive slumping demand as consumers face a widening array of options -- including new entries from Google and Microsoft -- in a market dominated by Apple Inc. Amazon, the world’s largest online retailer, relies on the Kindle to help sell digital movies, books and music -- an effort that may bolstered by the revamped device.
“The launch is important as it sets the stage for a fierce market share battle with Apple and Google -- or more likely a battle for second place, given Apple’s significant advantages,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco.
Before the announcement, the shares of Amazon rose as much as 2.5 percent to $252.27, a record high, as investors anticipated the tablet upgrade. Through yesterday, the stock had gained 42 percent this year.
Amazon’s share of the global tablet market slipped to 4 percent in the first-quarter from 17 percent in the December period, according to research firm IDC. Apple Inc.’s iPad widened its lead in the market to 68 percent in the first quarter, IDC said.
Microsoft and Google are pushing into a market that may reach $66.4 billion this year, according to research firm DisplaySearch. Apple plans to debut a smaller, cheaper iPad by year-end, two people with knowledge of the plans said in July.
Google, which makes the Android software that runs the Kindle Fire, is entering the running with the Nexus 7, a tablet that is thinner and lighter than the first Kindle Fire for the same $199 price. Google buyers have the option to upgrade to 16 gigabytes of storage from 8 gigabytes for $249.
The Nexus 7 also boasts Bluetooth connectivity, GPS and a camera.
Microsoft’s device, the Surface, has a 10.6-inch display and also is slimmer than the original Kindle Fire. It will run on Microsoft’s revamped Windows operating system and has a cover that serves as a full keyboard with a track pad. Microsoft hasn’t disclosed the price.
Amazon started selling the Kindle Fire in November, seeking to extend its success in e-readers into the fast-growing tablet market, where shipments may almost double to 116 million units this year, Gartner estimates. Still, its entry came at a cost to profitability -- Amazon spends $139.80 to make each Kindle Fire, according to IHS.
Also today, Amazon unveiled the Kindle Paperwhite e-book reader with a higher-resolution screen, for $119. It has light directed toward the screen, making it work better in direct sun. The cheapest Kindle reader will now cost $69, Amazon said.