Peter Kafka

Recent Posts by Peter Kafka

What iPad Problem? Citi Boosts Kindle Estimates

Lots of people think that the iPad is a problem for Kindle. Including marketing executives at Amazon, apparently, who have assembled an oddly defensive TV ad extolling their device’s virtues.

Chill out, says Citigroup’s Mark Mahaney. The analyst is bullish enough about the Kindle to boost his sales estimates for this year and 2011. Mahaney now thinks Amazon (AMZN) will sell 5 million units in 2010, up from an earlier estimate of 3.9 million; he predicts sales of 8.4 million units in 2011, up from an earlier target of 5.2 million units.

Why the bump? Because the Kindle has grown cheaper and cheaper since its 2007 introduction (click images to enlarge).

And because it’s easier and easier to buy a Kindle. Until this year if you wanted to buy the device you were forced to order online. But now Amazon is retailing them via brick and mortar retailers, too: Target (TGT), Best Buy (BBY) and Staples. That’s a total of some 4,300 stores in the U.S., and that’s a good thing.

More Kindles sold means more e-book titles sold, so Mahaney has bumped up those numbers, too. He assumes that each Kindle device represents two books sold per month, and that Amazon will sell 128 million units in 2010, and 271 million in 2011.

Note that even when a potential Kindle buyer grabs an iPad instead, it’s not the end of the world for Amazon, because it can sell e-book titles to iPad owners, too. (In fact, Amazon has begun selling the iPad itself.)

And the retailer still holds a huge edge on Apple in terms of available catalog. Mahaney says that 100 percent of the New York Times fiction and non-fiction best sellers are available on Amazon, versus 60 percent in Apple’s (AAPL) iBooks format (that’s down from 63 percent earlier this year).

Bottom line is that Mahaney thinks Kindle revenues will total $2.3 billion in 2010 and $3.6 billion in 2011. That’s 7 percent and 8.5 percent of total revenues–“successfully material to Amazon’s P&L,” as he notes.

Perhaps even big enough for Amazon itself to start breaking out Kindle business numbers to its investors, instead of its comically oblique press releases.