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Amazon Tablet Coming in 2011?

Could an Amazon tablet launch before the end of 2011?

The rumors have been circulating for quite some time, but these rumors gained even more steam this weekend when Consumer Reports interviewed Amazon CEO Jeff Bezos.

When asked whether Amazon is launching a multipurpose tablet, Bezos simply deadpanned: “Stay Tuned”.

Even though Bezo’s answer was pretty straightforward, I still try not to read too much into a single interview.

The most accurate way to track Amazon’s ambitions in the tablet space is to analyze the supply chain. Since manufacturing a tablet involves procuring parts from a fragmented network of suppliers, it’s relatively easy to track competitive movements in the supply chain. Recent supply checks from Digitimes indicate that Amazon has placed a large order from Quanta, who is also the key tablet supplier for the BlackBerry Playbook.

Taiwan-based notebook maker Quanta Computer has recently received OEM orders from Amazon for its reported tablet PC, according to sources from upstream component makers. The device’s monthly orders during the peak season are expected to reach about 700,000 to 800,000 units.

Quanta is expected to start shipping as soon as the second half of 2011 with the orders to contribute more than NT$100 billion (US$3.5 billion) to Quanta’s annual revenues in 2011, the sources noted. In response to the report, Quanta declined to comment on its clients.

The data seems to indicate that Amazon is making a strong push to gain entry to the coveted tablet market. It makes a lot of sense for Amazon to enter this market and here are some of the reasons why:

Amazon lacks a ‘mainstream’ consumer electronics focus

Gadgets are all the rage and Amazon is still on the sidelines. Apple has built a strong consumer electronics presence with the successful iPod, iPhone, and the iPad franchises.

These platforms have allowed Apple to drive significant revenue to their App and iTunes stores. Even though they are one of the most innovative technology companies, Amazon has yet to release a major tablet or a smartphone device. The Amazon Kindle has been a successful device, but it’s more of a niche gadget at this point.Amazon has the premium content to compete head-to-head with the iTunes Store

Amazon is one of the top leaders in selling music, videos, and books digitally. An Amazon tablet could definitely compete with the iPad because Amazon has such a rich content platform to leverage. Other OEM’s like Asus, Lenovo, and HTC lack the content network to sell these digital good on a mass scale, which gives Amazon a huge leg up on their competition.

Amazon Tablet + Amazon Clouddrive = Interesting Value Proposition

Amazon recently made a big splash and launched a free five-gigabyte cloud storage service for their customers. This technology allows customers to buy an album and store it directly on Amazon’s servers so they can stream it from a multitude of devices.

If they could pair this streaming technology, it would give Amazon a clear edge in this space. Tablets are still constrained by low storage capabilities, so it makes lots of sense to push for additional storage in the cloud. With their focus on cloud services, Amazon is definitely way ahead in this segment.

Amazon can compete on price

Margins are the name of the game and Amazon has a real opportunity to compress Apple’s margins from both a hardware and an app or content perspective. Android tablets are cheaper to manufacture so Amazon could feasibly unveil an Amazon tablet at US$399 or even less.

Another strategy would be to sell the hardware at a loss and earn margin from the content/app sales. Amazon could sell the tablet at bargain basement prices and generate revenue from these digital purchases. Keep in mind that Amazon has also been very successful with an ad-supported Kindle, so it wouldn’t surprise me to see them go back to this well again.

It should be interesting to see what happens, but I do think Amazon has a potential game-changer on their hands. Amazon has the technology, brand, content platform, and retail channels to bring this together. Their unique positioning, rich content platform, and cloud leadership enables an Amazon tablet to go head to head with the iPad.

This is a cross-post from Benzinga.com
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