SAN JOSE, Calif. -- For some time, I dismissed E-book readers.
I called them fads. Expensive gadgets--or even the latest in a long line of product disappointments, such as digital homes, mobile TV, tablet PCs, WiMax and others.
But now, I'm changing my tune about digital book readers. First, my mother bought one. And now, I'm beginning to see consumers buying them.
More importantly, the Kindle, Amazon's E-book reader, is gaining traction. I am truly surprised, making me believe that the Kindle could potentially be a driver for select semiconductors and LCDs. It's not a ''killer app'' but a nice driver.
Worldwide shipments of e-books are expected to grow from almost 1 million units in 2008 to close to 30 million units in 2013, according to market research company In-Stat (Scottsdale, Ariz.). This shipment growth is expected to result in a semiconductor market of $1.1 billion in 2013, In-Stat said.
I am not so sure about Sony's E-book reader or other devices. But clearly, Jim Friedland, an analyst from Cowen and Co., is bullish about the Kindle.
''We are raising our Kindle estimates based on our analysis of Amazon's Q2:09 10-Q filing. We project that the company will generate GAAP device and content revenues of $266 million in 2009, up 13 percent from our previous estimate of $235 million,'' he said in a new report. ''We believe Kindle device and content revenues will account for 10 percent of Amazon's North American sales in five years, or $2.3 billion in GAAP revenues.''
Going forward, Kindle will continue to gain momentum. The Cowen analyst is ''increasing 2010E unit sales estimate by 11 percent to 1.8 million. We expect that Amazon will end 2009 with 1.5 million active Kindle units, increasing to 3.0 million by the end of 2010. We believe that 17 percent of active U.S. Amazon customers and 4 percent of the total U.S. population will own in a Kindle in five years.''
Not too bad. So why is the Kindle taking off? ''We expect growth to be driven by: (1) low-cost marketing on the homepages of Amazon's 50-55 million U.S. users; (2) lower prices for e-books versus traditional books; (3) declining device prices driven by cost efficiencies from higher unit volumes; (4) potential adoption by educational institutions; and (5) we believe it is unlikely that competitors will be able to make a dent in the iTunes/iPod-like position the Kindle is building in the market.''
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