Sales of Amazon’s Kindle ereader plummeted by a shocking 75 per cent in the first quarter of 2012, according to analyst Paulo Santos, who studied the Kindle supply chain and went through Amazon’s latest financial results pretty closely.
Amazon has never officially revealed how many Kindles (of any type) it has sold but it’s possible to make an educated guess based on the fortunes of other companies such as E Ink Holdings, which makes the displays for Kindle readers.
Writing on SeekingAlpha.com, Santos says that Amazon needed no new E Ink displays for the first quarter of this year. In previous quarters he estimates that Amazon was shifting about seven million of its ereaders, but he calculates that sales in Q1 2012 were only 1.75 million. That’s not counting the Kindle Fire tablet that uses a conventional LCD screen, but he comes back to that later.
Put simply, sales must have fallen by at least 75 per cent since the end of 2011 if Amazon had a surplus of parts and did not need to order any more.
Scott Liu, chairman of E Ink Holdings was quoted in the Taipei Times as admitting, "Our major customer was too optimistic about its sales in the fourth quarter of last year and ordered too much from us. That made the customer order almost nothing from us in the first quarter."
The drop in demand coincided with the US launch of the Kindle Fire, which Santos thinks was a contributing factor. He says, “The drop in Kindle e-reader sales came with the introduction of the Kindle Fire, and the cannibalisation has been nothing short of stunning, massive.”
So, customers who may have been thinking about getting an e-ink Kindle may have instead opted for the more tablet-like Fire, at least in the US. However, it’s not like the Kindle Fire is a runaway success either.
Santos says its sales are now falling sharply too because it suffers a similar problem to other Android tablets in that hardly anyone is buying and using them compared to Apple’s iPad, which dominates the sector.
Santos concludes that Amazon’s latest financial results prove his theory. The Kindle line is sold to customers almost at cost price as a way of drawing users in to Amazon’s more lucrative digital media store.
The retail giant revealed strong earnings in the first quarter of the year, which tallies with the idea that it’s no longer taking a big hit in the wallet by selling Kindle hardware for no profit.
Perhaps the rumoured addition of Harry Potter to the Kindle store will give the platform a boost.
Have ebook readers peaked? Are people starting to prefer more multifunctional tablets, even though they are heavier, more fragile and less readable in direct sunlight? It will be interesting to see where this goes.
Via Seeking Alpha