Analyst Opinion - There were three big announcements this week. One of the most anticipated announcements was the Kindle 2, a product that has, as of now, failed to achieve the iPod-like potential it has. In addition, we saw AMD launch its marketing-rich Dragon platform followed by Intel, which announced it would have 32 nm processors for both desktop and mobile products in production by year end. I could have titled this column “How to drive Steve Jobs insane”, but I have to think he is sitting back and is thinking that the folks, particularly those at Amazon, just don't get it.
Kindle vs. iPod: The missing power of Steve Jobs
The Kindle is, by any measure, a product that should be at least as popular as the original iPod. It does for reading material what the iPod does for music and the potential audience for both products is about equal in number, though the Kindle's demographic probably trends older. Both products have compelling unique capabilities to enhance the experience; iTunes has music at $1 a track that easily transfers to the iPod and the Kindle has books at $9 each that does the same. You'll likely only read the book once but it will likely consume as much time as you'll use listening to nine songs.
The original iPod was $400 and required an Apple PC. The Kindle is $359 and does not require a PC at all to work. Granted, the iPod Touch with a whopping 32 GB is $374 and will likely do a better job with eBooks than the Kindle does with music, but reading on an LCD screen has never been a great long term experience (having done it for awhile myself), because of eye strain and battery life issues (which is why the Kindle uses ePaper).
Estimates are that the original Kindle sold around 500,000 units in 2008 and the new Kindle will sell between 750,000 and 1 million in 2009, while Apple regularly sells more than 11 million iPods every quarter. Yes, Apple has a broad line of iPods now and the iPod line will outsell the Kindle, but the Kindle should be able to sell better than 10% of the iPods or around 4 million a year and is running well below a quarter of that. Much of this is due to Steve Jobs, a resource only Apple has and Amazon clearly doesn't.
Steve Jobs knows how to stage and market a product. The presentation of the Kindle 2 was dull with the notion that it is too expensive (Apple products successfully price high). There was virtually no cheering or excitement even though a good portion of the audience were Kindle fans. Marketing for the Kindle has historically been nearly non-existent while Apple puts the iPod in your face as much as their comparatively large budget will allow.
My point here is that I believe that while Steve Jobs likely would have changed the product a bit, even if it was identical to what Amazon announced and sold only by Amazon, he would have sold 4x+ as many. That is the power of being able to stage and market a product.
AMD Dragon vs. Intel 32 nm
I have to figure that Intel drives Apple nuts. Intel just announced that by the end of 2009 they may be two generations ahead of where AMD currently is. Every time Intel makes an announcement like its aggressive move to 32 nm, they effectively preannounce a future Apple line that will use it and potentially shift demand for PCs in the current quarter out until that future period. Don't get me wrong, this is a powerful announcement and it showcases that Intel knows it is ahead (possibly by as much as two cycles), running faster, and starting to lengthen its stride. The problem is that people aren't buying PCs at the moment and giving them another reason not to buy is probably not the best thing to do right now. Part of the reason for this is to help drive a more positive US outlook by showcasing Intel, along with companies like Cisco and to show that they continue to invest in the nation's future.
In general, announcements like this showcase the difference between a technology driven company and one that is marketing driven. A technology company wants the credit for the accomplishment as soon as possible while the marketing driven company wants to drive the highest sales wave that can be achieved. That's why Apple, which is marketing driven, waits (the first iPhone being the exception) until something is ready before they announce it; they want buyers in stores buying and not waiting for a future event.
AMD Dragon, which was announced earlier this week, is desktop only, unfortunately, but it is a more marketing driven exercise. It speaks to products you can buy right now; it wraps the AMD solution (both CPU and GPU) with a brand people can remember, Dragon - as in “I want a Dragon system”. And it potentially gets people into stores buying a product at a time when they otherwise might not. Granted AMD doesn't have the marketing budget that Apple has, but this effort should have a more positive impact on this quarter's financial performance than Intel's announcement will, because Intel can't sell what they don't yet have.
In the long term, this battle between AMD and Intel will likely depend on AMD's ability to market its platform advantages (the whole is better than the sum of the parts) over Intel's clear and apparently accelerating technology lead on processors.
It is interesting to note that in the current tough marketing conditions, the firms that seem to invest more in marketing - like Apple and HP - seem to be doing better than those that don't. People continue to buy new hardware, there are just fewer buying at the moment. With firms cutting back on their marketing, those that are better able to hold the line are standing out and getting a higher percentage of what is left.
The new Kindle, as was the old, will be hurt by Amazon's inability to present the product the way that Apple presented the various versions of the iPod (though it once again highlights the problem Apple will have once Steve Jobs departs). Dragon is a well marketed concept and showcases one of the ways AMD can position against a surging Intel. But Intel's announcement serves as a warning that AMD will need to up their platform game a lot by year end to stay in the race.
I believe 2009 and 2010 will be defined by companies that find a way to make their products stand out and rise above the noise. Coincidently, Dell launched its Adamo site, suggesting other companies also understand the importance of marketing in the current economic environment.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The opinions expressed in this commentary are solely those of the writer.