Analyst: LTE Kindle Fire Coming Next Year
Based on his discussions with Taiwan sources, Bernstein Research Senior Analyst Carlos Kirjner writes in a research note Thursday that at least two new Kindle Fire models will be introduced by the fourth quarter of 2012, including a 9.6- or 10.1-inch color Wi-Fi model and a seven-inch 3G plus high-speed access-plus (HSPA+) and/or Long Term Evolution (LTE) version.
Kirjner didn’t predict which wireless operators would support the tablet, but by the end of 2012, all four Tier 1 operators in the U.S. will be fair game.
LTE heats up Fire profit margins
The analyst writes that these subsequent models will improve the Fire’s gross margins since the price premium for models with wide area networking capability is higher than the corresponding increase in the bill of materials (BOM).
Indeed, Light Reading sister company UBM TechInsights performed a teardown on the Wi-Fi version and found the total BOM to be $143, making the company $55 on every device sold. In the original Fire, Amazon included an older, low-cost Wi-Fi module built by Texas Instruments Inc. (NYSE: TXN) to keep prices down to only $3 per device. (See Amazon's Kindle Fire Sells for $55 Over Cost and Amazon's $199 Tablet Is No Loss Leader.)
Based on Apple Inc. (Nasdaq: AAPL)’s $25 3G chip in the iPad 2, TechInsights estimates that adding 3G connectivity to a tablet could cost around $20 more. A dual-mode 3G/4G chip would up the price even more, and the final BOM for a connected Fire would also depend on what other features Amazon packs in. Bernstein’s Kirjner believes the follow-ups will include improved usability, features and performance as with previous generations of the Kindle.
Growth in the low end
Neither analyst firm projected what the 4G version of the Fire would retail for, but seeing as the tablet has proved to be popular based largely on its price, Amazon will have to balance the price increase against any new features it might add.
Bernstein does believe that the company will continue to thrive in the low end with its original Fire, however. Kirjner says that as Amazon begins to market the Fire in Western Europe by mid 2012, its sales could reach 22 million in 2012 and 40 million in 2012. This is compared to his forecast that global demand for all low-end tablets will reach 49 million units in 2012 and 94 million in 2013.
In terms of what that means for Amazon, Kirjner says Fire device sales will drive 2012 revenues to $4.4 billion and 2013 revenues to $8 billion. And that’s before Amazon’s Web services sales, its real moneymaker, are factored in.
“We estimate that new Kindle platform users who acquire a Fire have a customer lifecycle value of approximately $140, if we take into account upside from sales of accessories and increased e-book sales, or $212 if we ascribe some value due to the potential lift in other e-commerce activity at Amazon.com,” Kirjner concludes.
— Sarah Reedy, Senior Reporter, Light Reading Mobile