Kindle May Be Amazon's iPod: "Kindle Premium" As Much As $9 Billion

Amazon.com's hand-held electronic reading gadget, the Kindle, is selling like hot cakes. It sold out over Christmas. Those available secondhand are going for up to twice the $360 retail price. Assuming the success of the Kindle partly accounts for Amazon's crazy stock price, there may be a way to assess its value.

Consider Amazon's core business is selling books, DVDs and all manner of other goods online. Analysts estimate the company's sales will grow by 12.5 percent this year. Its rival, Wal-Mart, is predicted to have a sales increase of only 5 percent, though analysts think its earnings will grow slightly faster than Amazon's, reflecting Wal-Mart's economies of scale and Amazon's investment expenses.

Still, with robust sales growth, Amazon deserves to be valued at a higher price-to-earnings ratio. At 20 times earnings -- a generous 50 percent premium to Wal-Mart's 14 times -- Amazon's core business would be worth about $13 billion.

Amazon's current $24 billion market capitalization represents a whopping premium to that figure. Even stripping out $2 billion of cash, $9 billion of value is apparently unaccounted for. Could that be the "Kindle premium"?

Read the whole story here.

Comments

[vmonter]

Idiot yuppies wasting their money AND destroying the environment ... use the library retards!

[brynnrose thorn]

I think you are being needlessly judgmental and rude. Not everyone can get to the library, me for instance. How would the Kindle destroy the environment? No trees used for paper, no gas being burned going to and from the library. The authors and publishers still get their money because the file transfer can't be stolen. It's a win-win.

I'm a bookworm and have overflowing bookshelves to prove it. I can't afford a Kindle and that's the only reason I don't have one.

[hortonhearsawho2]

Reminds one, who knew that old school was still sage. Son, you have to be able to read before you can blog...

[hortonhearsawho2]

Open your Kindle to page 2008 class...

[hortonhearsawho2]

Sarah get hers yet ?

[Lupin77]

I don't think this is true. This could be a case of over exaggeration of sales. Don't think the item is as hot as it's claimed and this could be a marketing ploy to try to get people to buy it. People still prefer paper books and not this sort of electronic gadget.

[marijam]

To the contrary. I love my Kindle and actually find that I prefer it now. I take it everywhere with me and read more than I ever did.

[Groovyyaya]

Actually, I think this board is misrepresenting the "negativity" towards the Kindle.

Go read one in public (esp. at the airport). Be sure you aren't reading anything embarrassing, because people WILL read over your shoulder and will want to try it out! I've never had someone say "Ugh, how can you stand it? Its so hideous and only has one function!" (I've had people say they don't read enough to warrant it, but these are people who maybe read a book a year)

[OGWiseman]

I just hope people realize that Kindle is the death of books. Once people can steal a book as easily as they can steal a song, that's it. It's over. Musicians have the secondary revenue stream, concerts, and they never made much money on CD sales anyway. Authors have no such recourse. What are they going to do, charge people to get into readings?

[mjb5406]

Except that, with Kindle, there is only one way to get books... over the air (via an EVDO cellular connection provided by Verizon Wireless) ONLY from Amazon. Kind of limits what you can "steal",

[hortonhearsawho2]

Will they Book them for murder...little lite humor, read that.

[berensma]

I think you're incorrect on this. Once you buy a book on Kindle, you can't share it with anyone unless you loan them the actual kindle. and, nothing is free on the kindle as far as I can tell.

[bstadil]

This article is amazing in its ignorance. Amazon through its Cloud Computing effort is poised to become one of the pre eminent information technology companies. They are the lead provider by a large margin and their API is emerging as the de facto standard.

The author puts this a zero value or close. Small wonder the main stream media is dying.

[jaldous]

I have a kindle and I love it. It is a great reading experience. Just hope future versions will have color and/or other options to better display illustrations, photos and screenshots. In the meantime, I love my v1 product. As an avid reader I love being able to take "one" book on vacation and then be able to download new books any where any time. I like the size too.

[mjb5406]

I doubt you'll see color... the majority of published books (mainstream) have B&W pictures and illustrations. I think, more likely, you'll see higher resolution greyscale displays to give a better view of the electronic ink.

[KarateKid]

if people want to spend money on a product that only does one thing, is bulky, and books are expensive and proprietary, it's a free country. But to tout its "superiority" is patently false.

The product will never pay for itself, even for the most avid reader. By contrast, a laptop can be had for $360 that does so much more, including the ability to read books of many formats, a lot of them for free. I have the entire collections of Tom Clancy, Michael Crichton, Stephen King, Robert Ludlum, John Grisham, Jean Auel, J.K. Rowling, and many, many others and didn't pay a red cent for them. The Internet is a wonderful place, no?

For a business traveler, Kindle is not very efficient since it does not send/receive email, have word processors, spreadsheets, or other business applications. It's strictly a frivolous, one dimensional entertainment venue.

[OGWiseman]

You're pretty cavalier about your theft, KarateKid. Look, I've downloaded some songs illegally, too, but I hope you realize the books you listed represent literally hundreds of thousands of hours of effort by the people who wrote and edited and published them. And it's not like you're going to go see a concert by one of these authors like I do with bands.

[booker52]

You can download these books from your local library for free!!!!!

[KarateKid]

You've downloaded some songs illegally, so you're passing judgment on someone else. LMAO. What a hypocrite.

[hey0there]

the price is absolutely ridiculous. Why is the price so high?

[research]

You can buy a notebook for that price.

[Groovyyaya]

In response to the criticisms (which I worried about until I got my Kindle last year):

1. "Looks" - this CAN'T be small like an iPod. It's the size & shape of a hardback or trade paperback - and that feels right. Ergonomically it works. You are only focused on the words anyway.

2. Screen - Its an e-ink screen. Meaning it isn't backlit. Yes, I need a lamp to read, but I can read it in sunlight!

3. Storage - When I travel, it is often a conflict between "will I have enough to read" vs. "how light can I travel". The Kindle can hold a lot of books and is always the same weight.

4. Backup. - Amazon keeps track of my purchases so if I buy another Kindle, lose my Kindle, etc. I can download another copy. With iTunes, if something happens you are SOL.

5. Price, etc. - I thought it was expensive... then I found out how much per month you have to pay for email/web access on a phone, palm, etc. Its FREE with the Kindle. I can explore the bookstore (on my Kindle) for as long as I want, without having to worry about "minutes". Plus, Amazon e-books are usually cheaper than other sites.

Its okay if it is not for you... BUT, I do think that the comparison to the iPod is accurate.

[Merckx]

Mostly true. You can back up with I-tunes.

[Groovyyaya]

Ah, but its a pain in the hiney, and means I have to buy discs or a separate harddrive to do so. I'm not filling up that spare hardrive or discs with the Kindle books either.

Lets put it this way... if, God forbid, your house burns down with your Computer, iPod, Kindle, AND your backup discs. If you are well insuranced, you will be able to replace all of those things - but not your files. Your iTunes library (as well as all of your other documents are toast.

Now, as soon as you got your replacement Kindle and your new computer, you'd be able to go to the Amazon website and download all your books to your new Kindle. No extra charge, or anything.

[KarateKid]

1. "Looks" - Well, I guess beauty is in the eye of the beholder, but it's bulky. If you don't travel with a laptop, I suppose it works, but it only does ONE thing. Not efficient.

2. Screen - You can't read it indoors without a light; and who reads in sunlight?

3. Storage - The Kindle can hold a lot of books, at $9.95 a pop. How many books does someone read anyway? Do you read all day and all night?

4. Backup - Wrong. You back up on iTunes and your information is stored. You are NOT SOL. Check your facts.

5. Price - Now here's the rub. It does only ONE thing, and it costs as much as a laptop. Then, add $9.95 and up for every book you buy. It's proprietary, so you can't read ebooks of other formats. What on earth are you talking about re: email/web access? What do you mean by minutes? Yeah, you can explore your bookstore, all right, just have your credit card handy.

No thanks. On an iPhone (not an iPod), you can do so much more than on a Kindle. I have over 300 books on my iPhone, and with the backlight turned down, it reads just fine, thank you. Go ahead, waste your money, it's your choice. But for most of us, we prefer greater value and use.

[mjb5406]

(2) Screen - Since when do physical books have backlights?

(3) Storage - if you buy legal copies of e-books from eReader or audiobooks from Audible, they are 9.95 and up. Unless you're advocating piracy and removal of DRM.

(4) Backup - if you don't backup your iTunes purchases yourself, you're SOL. Like eReader and Audible, Amazon keeps your "bookshelf" so you don't have to worry about doing a backup.

I don't own a Kindle, but may... I am visually impaired and sold my iPod Touch because the screen was too small for ebook reading. The Kindle makes more sense. But thanks for thinking that you speak for "most of us".

[beanchihuahua]

I can get library books for free. I don't need gadgetry like that.

[benne]

Yes, and the consequence of the domination of the Kindle could be disastrous to the publishing industry.

[mjb5406]

Who do you think gets the profit from the sale of ebooks??? Publishers like Random House have put the clamps down on Audible to make more profit. The publishers will do fine. Their profit will increase because (a) they don't have to print physical paper and (2) they don't have to ship physical books.

[SwingingFromCenter]

Look, I'm a techrat. I'm one of the biggest tech rats on this planet. That being said...

I don't get the Kindle.

It costs as much as a mini laptop and has infinitely less functionality. It amazes me that this country has become so dumbed down to where people think it's a good idea to pay 400 dollars for the ability to read a book.

[billstewart]

My wife tried a Kindle last summer, and ended up deciding it wasn't quite ready for her. As a book-reader, it was *nice*; close enough to reading real books to be usable.
One of the things that makes the Kindle really cool is the wireless Internet connection, paid for upfront with no monthly fee. It's not blazingly fast, but that's ok. But its web browser is really clumsy, especially for anything requiring much input or mouse control, and that's what killed it for us. Google Maps was pretty much unusable (which would have been a killer app, as an alternative to a GPS which were still expensive last summer), and even Google was hard to use, and suprisingly even using Amazon's web site was hard to use. Some of the limitations are inherent to the platform (no real mouse, slow processor and screen refresh), but some may be a limited vision of what the device can do or it may be deliberate - they're not in the business of selling you flat-rate full internet access at that price. If they fix it in the next version, we may be back.