Amazon could sell up to five million tablet computers by the end of this year, and become a serious rival to Apple in the long term, according to a new report from Forrester Research.
The web retailer is reportedly planning to release an Android tablet in the next month and a second model next year.
Forrester analyst Sarah Rotman Epps said that Amazon is likely to create its own "Amazon tablet", and will partner with OEMs to "provide a richer customer experience".
"Even though Amazon taking on Apple is a bit like David taking on Goliath, Amazon's willingness to sell hardware at a loss, combined with the strength of its brand, content, cloud infrastructure and e-commerce assets, makes it the only credible iPad competitor in the market," she said.
The analyst believes that Amazon could sell three to five million tablets in the last quarter of this year if the device costs less than $300.
Amazon's Kindle is the leading dedicated e-book reader, but the company has yet to prove itself in the highly competitive tablet market, which has already seen HP scrap its TouchPad after sales failed to take off.
One of the main reasons Apple has performed so well in the tablet market is that developers have invested in iPad apps but have held back from creating apps for Android devices.
Apple claims 100,000 custom-built iPad apps, while Google's Honeycomb platform has attracted fewer than 300 apps, according to Rotman Epps. However, an Amazon tablet has the potential to change this developer bias.
"If Amazon's Android-based tablet sells in the millions, Android will suddenly appear much more attractive to developers who have taken a wait-and-see approach," she said.
The analyst concluded that relations between Amazon and Apple will become increasingly strained in the near future. The companies have already clashed over the 'app store' brand.
"Apple sells software and services, but the lion's share of Apple's revenue still comes from hardware, which makes it vulnerable to a company such as Amazon that isn't seeking profit from hardware sales," she said.
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