Amazon Investing in Future Kindle Fire Tablets
According to Reuters, Calcalist (an Israeli financial newspaper) has confirmed that Amazon has already entered into advanced talks with Texas Instruments to finalize the acquisition. The deal is expected to be worth billions of dollars to Texas Instruments.
By acquiring a chipmaker, Amazon would be able to play a greater role in the devices it produces. The company already manufactures four versions of the Kindle Fire tablet, as well as multiple versions of the Kindle e-reader. Amazon is expected to unveil its first smartphone in 2013.
This acquisition is not unprecedented for Amazon, which has been spending millions to bolster its core businesses. In 2012, the online retail giant signed more viewing content deals for its streaming video service, Amazon Prime, than either of its chief competitors -- Netflix (NASDAQ: NFLX) and Hulu. Tablets are a key part of that strategy, which is to get consumers to use Amazon's own products and services. This is a departure from the retailer's initial goal, which was simply to ship and sell other manufacturers' products at a reasonable price.
If Amazon completes the acquisition, it could be a problem for Barnes & Noble (NYSE: BKS) and other manufacturers that use chips made by Texas Instruments. The Nook HD+, one of two new tablets Barnes & Noble set to be released this fall, features a Texas Instruments 1.5 GHz OMAP4470 Dual-Core Processor. While Amazon could still manufacture chips for its competitors, it could also choose to save the best processors for its own devices.
Thus far, Amazon has favored price over quality. While the new Kindle Fire tablets have made a significant leap ahead of their 11-month-old predecessor, the updated tablets were still designed to undercut the price of Apple's (NASDAQ: AAPL) iPad. By expressing interest in designing its own chips, Amazon might be looking to change that in the near future and compete on a level playing field.
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