Amazon 3Q stock chart - third quarter of 2010

It’s a special time of year — when major corporations finally reveal the secret numbers about how their companies performed over the previous 13 weeks. Yesterday Amazon released their own quarterly earnings reports, right in the middle of a week of rumors and predictions about tablet-sized reading devices. Amazon reminded investors that the newest generation of Kindles are “the fastest-selling Kindles of all time.” And they’re also the #1 best-selling product on Amazon — both in America and Britain.

“A sour economy failed to slow down Amazon.com,” reported the New York TImes, “as the company’s net sales climbed 39 percent in the third quarter.” But what’s more interesting is what they didn’t say. A financial analyst in San Francisco believes that this year, Amazon will earn a whopping $2.8 billion from their Kindles and ebook purchases, according to Bloomberg news. And within two years, that number could nearly double, to $5.3 billion in 2012!

That’d break down to the equivalent of 15 million Kindles sold in 2010, and 30 million in 2012 — though some of the profits obviously are coming from ebook sales. But what’s even more interesting is the analyst’s second comment. Kindle users “will not only continue buying more e-books, but also subscriptions, accessories, [and] hardware warranties,” he predicted, saying eventually the devices would be used to deliver music and even full-motion video. Will Amazon eventually open up new stores for Kindle music and Kindle video?

And that’s where the first rumor gets a lot more interesting. While Amazon was announcing their quarterly results, C|Net also reported that this Tuesday, Barnes and Noble will reveal a digital reader with a full-color touch-screen — the “Nook Color,” priced at $249. “It’s a big step ahead, instead of chasing Amazon,” their source explained, adding that it’d be based on Google’s popular Android operating system, and would sell for half the price of Apple’s tablet-sized iPad. It’d ship with a 7-inch color screen — which is a magic dimension size that has already been generating some controversy.

“One naturally thinks that a seven-inch screen would offer 70 percent of the benefits of a 10-inch screen,” Apple’s Steve Jobs told analysts Tuesday when announcing their own quarterly earnings. “Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a seven-inch screen is only 45 percent as large as iPad’s 10-inch screen. You heard me right: just 45 percent as large…
The seven-inch tablets are tweeners: too big to compete with a smartphone, and too small to compete with an iPad.”

Jobs insisted that his comments were based on Apple’s “extensive user testing on touch interfaces over many years…we really understand this stuff.” But the truth probably lurks somewhere between the lines. Reading devices have proven to be so popular, that none of these companies want to get left behind. It’s not just that Amazon’s Kindle-related profits are probably already in the billions of dollars. It’s that selling us millions of Kindles means we’ll keep using Amazon’s store for our future purchases — of e-books today, but maybe also for music-and-video purchases in the future. So while I’m casually reading my e-books, major corporations are already fighting the war of tablet-sized reading devices.

And honestly, I’m not sure how I feel about all this speculation. I just worry that someday we’ll look back with a fond nostalgia to the Kindle 1. “It didn’t offer full-motion color video on high-definition screen,” we’ll say.

“But it was really great for reading books.”

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Apple's Steve Jobs and the iPad vs Amazon's Kindle
It’s one of the most controversial comments ever made. Nearly three years ago, Steve Jobs was asked about the Kindle at the annual Mac World conference, and he made a startling declaration.

“It doesn’t matter how good or bad the product is, the fact is that people don’t read any more. Forty percent of the people in the United States read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”

But not everyone agreed with his cynicism about the business of ebooks, including the technology blog at The New York Times.

“That may well be true, but it doesn’t take into account that a large percentage of the books are bought by a small number of readers…a relatively small number of people…represent a disproportionately large share of profits.”

And of course, Apple’s statistic also proves that 60 percent of Americans do read more than one book each year.

I think Jobs’ comment was motivated by a feeling of fierce competition. But nearly three years later, it still remembered in Amazon’s Kindle discussion forum. When Apple finally unveiled the iPad in January, Steve Jobs reportedly demonstrated its reading capability, and then conceded that Amazon “has done a great job of pioneering this… we’re going to stand on their shoulders for this.” I think that today, it’s become a different question: not whether there’s a market for ebooks, but whether that’s a selling point in the war between tablet-sized devices.

“No matter how cheap or technologically cool the iPad or Kindle are, ebooks will never come close to actual books…” complained one of my readers last week. But almost as soon as the iPad was released, reporters began comparing its screen to the Kindle’s. The rivalry between the devices heated up last week with Amazon’s newest TV ad. It uses two people talking at a swimming pool to demonstrate that sunlight glares off your iPad’s screen if you read it outdoors.

It’s one very specific difference between the devices, but business analysts are already analyzing the message. Yesterday The Motley Fool tracked down Len Edgerly, who is both a former business reporter and very popular Kindle podcaster, and specifically asked him about Amazon’s new ad. It was fun to hear that Edgerly actually does read his Kindle at the beach, and he describes the experience as delightful. “You also have the feeling that you are not taking a computer to the beach…”

Apparently it’s not just that there’s no glare from the sun; it’s that the Kindle is as light as a pair of sandals. At one and a half pounds, the iPad is nearly three times as heavy as the Kindle, with new versions weighing in at just 8.5 ounces. Judging by Edgerly’s experience, this could be a deciding factor for some users in the war between the iPad and the Kindle.

“[A]fter about a half an hour of reading a book, the iPad just seemed to get heavier and heavier and less and less pleasing to hold…”