Peter Kafka

Recent Posts by Peter Kafka

Citi Says Amazon Sold 500,000 Kindles Last Year; $1.2 Billion Business Next Year

Amazon is set to unveil Kindle 2.0 next Monday at a New York press event. But how many of the original e-book readers has it sold already? Don’t ask Jeff Bezos and company–the Amazon folks delight in keeping most of the company opaque to the outside world.

But Mark Mahaney thinks he knows: The Citigroup analyst estimates that Amazon (AMZN) sold 500,000 devices last year. And he figures that the Kindle, which he delights in calling the “iPod of the Book World,” will become a $1.2 billion business by 2010.

Watching Mahaney get to his numbers makes for interesting reading, if you enjoy reading analyst reports: He derives the 500,000 number via a filing by Amazon partner Sprint (S), which handles the wireless service for the e-books. And he gets to the $1.2 billion number by assuming that Kindle adoption will be similar to that of Apple’s (AAPL) music player several years ago, and that Kindle owners will buy a digital book each month. (Click chart to enlarge)

Also worth noting: Mahaney’s larger thesis, which is that Amazon is making great strides at anticipating and adapting to a future where most of its inventory is delivered digitally. And as with Netflix (NFLX), that doing so isn’t an option–it’s required:

The structural challenge facing Amazon is that approximately 50% of its revenue is generated from the sale of books, music, and videos–three  product categories that are all in the process of being digitized. If Amazon can’t successfully jump the chasm from Internet-ordered/mailman-delivered media products to Internet-ordered/digitally-delivered media products, its financial fundamentals and its stock price will be significantly challenged.”

But maybe you don’t care about revenue models or stock prices. Maybe you just want to see shiny new gadgets. OK. Mahaney has a little something for you, too. Here’s what he envisions for Kindle 2.0:

  • Longer and thinner than Kindle 1.0
  • Less crummy key pad and buttons, so it’s less likely that you’ll accidentally turn the page
  • No touchscreen
  • No color screen
  • Price: Perhaps as low as $300, down from today’s $359

My prediction: The geeksugar people are going to be baking a new Kindle cake next week.