Nexus 7 kills Kindle Fire, but isn't up to iPad, analysts say

Google's $199 Nexus 7 tablet is a device that's more than a competitor to Amazon's Kindle Fire, but is not on the same scale as the Apple iPad -- at least not yet, analysts said Wednesday.

The secret to Google's success with the Nexus 7 will come down to the apps that developers build for it, and how successfully Google integrates the tablet into its Google Play cloud-based media and apps repository, analysts said.

"Nexus 7 is more than a Kindle Fire competitor, but certainly no iPad killer," said Jack Gold, an analyst at J. Gold Associates.

Google has "shown an interest in building a presence in the tablet market and using [its Google Play] content to differentiate the hardware," said Carolina Milanesi, an analyst at Gartner.

"Fire happens to be the device Google competes against at the moment, but let's be clear: Google did not do this because they are worried about the Kindle Fire," Milanesi added. "They did it because they need to be successful in the tablet market, and we have seen that $199 is a sweet spot."

Gold said he was impressed that the Nexus 7 has a high-quality Tegra 3 quad-core processor, and that Google could still keep the price for the 8GB version below $200. Google is also selling a 16GB version for $249, and both are on sale at the Google Play site, with delivery set for mid-July.

Gold said the 1280 x 800 screen is "reasonable, but not the highest quality out there" without high definition, but he still called the Nexus 7 a "credible contender at a good price that should help Google get a kickstart in the Android tablet market."

The Fire from Amazon sells for $199 and also has a 7-inch screen. An updated version is expected in July from Amazon at possibly a lower price. The Fire has about 7% of the global tablet market, according to IDC, while the $499 iPad, at 9.7-in., has about 60% of the market -- a bigger target for Google.

"Google just cut [Kindle Fire's] knees off with this Nexus 7," said Ken Dulaney, also a Garnet analyst. "The going will be very tough for the Amazon Kindle."

Amazon did not immediately respond to a request for comment.

Even so, some analysts said Google starts with a disadvantage over both Amazon and Apple. "Google's user base for music, books and movies is not nearly as strong as Apple or Amazon, so it will take time to build a strong customer base," said Frank Gillett, an analyst with Forrester Research.

"Google's real tablet problem is the lack of compelling tablet-optimized apps, and Google has yet to address how to motivate developers to fill the gap," Gillett added.

James McQuivey, another Forrester analyst, said Google will need Google Play content and services and video content from YouTube to succeed. "That range of services will be the secret to stitching together a rag-tag fleet of Android gadgets into a platform that can compete with Apple for minutes of users' attention," rather than requiring users to pay premium dollars for an iPad or other more expensive device to do so, he said.

Google also picked up the low-price lesson from Amazon with its Kindle Fire, McQuivey said. "Google can see that the only way to beat the premium-worthy iPad is to go for the millions of customers who are ready for smaller and cheaper tablets," he said.

The Nexus 7 uses a reference design from Nvidia called Kai. The design is intended to use the Tegra 3 processor to increase battery life and offer a "premium experience" in a low-cost tablet, an Nvidia spokesman said. Nvidia also has a blog on its website that explains how the Nexus 7 uses the Kai design.

Forrester expects 191 million tablets to be in use globally this year. By 2016, that number is expected to jump to 760 million tablets. In 2012, Forrester said the iPad will reach a 68% tablet share globally, with Android at 16%. By 2016, iPad will drop to 53%, while Android will drop to 8% and Windows tablets will take 18%.

Copyright © 2012 IDG Communications, Inc.

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