News

Amazon cuts Kindle price tag as competition grows

Dan Gallagher
MarketWatch (MCT)

SAN FRANCISCO — Amazon.com Inc. cut the price of its Kindle electronic-book reader for the second time this year, as competition continues to grow in the fledgling e-book space.

Late Tuesday night, Amazon announced that it cut the price of the Kindle by $40 to $259. The move comes just three months after the company slashed the price tag of the device by $60 — equating a total price reduction of 28 percent during that period.

"In our view, the price cut is Amazon's response not only to economies of scale but also to growing competition," Sandeep Aggarwal of Collins Stewart wrote in a note to clients Wednesday morning.

The company also announced that it would sell an international version of the device — one that can purchase and download books in more than 100 countries. Previous versions of the Kindle could only be bought and used on wireless networks inside the United States.

AT&T Inc. will provide wireless connectivity for the international device. Sprint provides the service for the domestic version.

In a statement, the company said the international version of the Kindle will sell for $279 and will be available for shipping on Oct. 19.

The price cut and new international version are likely part of Amazon's efforts to get in front of the growing competition in the e-reader market. Sony Corp. has updated its line of e-reader devices, with at least one model priced at $199 — lower than the Kindle.

Also over the next few months, new devices from Netherlands-based iRex and U.S. startup Plastic Logic are set to hit the market.

"While the price cut comes slightly earlier than expected, we see this as typical Amazon (cutting prices prior to the market having a viable competitor) and sets up the Kindle for a full runway for Q4," Citigroup analyst Mark Mahaney wrote in a note Wednesday.

Mahaney added that the price cut "increases the chance that the Kindle becomes one of the hit products this holiday season."

Shares of Amazon were up 3.4 percent at $94 by early Wednesday afternoon.

The company does not disclose sales figures for the Kindle, but analysts believe the company has sold more than 1 million units since its original debut in the fall of 2007. Mahaney upped his estimate for the current year to 1.5 million units from 1 million prior to the latest price cut.

A report out from Forrester Research on Wednesday predicted that overall sales of e-readers would hit 3 million units this year — with about one-third of those coming in the holiday season. Amazon is expected to account for about 60 percent of those, followed by Sony at 35 percent and the rest split among the smaller players.

The Kindle allows readers to buy and download books through a wireless connection and read them on the screen. More than 350,000 books — plus magazine and newspaper subscriptions — are available at Amazon's Kindle store.

One drawback for rivals has been their inability to match the number of new titles that are purchasable through Amazon. Yet they say they are working with publishers and other booksellers, including book-seller Barnes & Noble, to match Amazon's offering.

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