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Amazon might take a bite out of Apple with an Android tablet

by Kellie Bartoli

Amazon (AMZN) is much more than just the online shopping hotspot it started out as. The website is becoming competition for iTunes, Netflix (NFLX), even your local library… and it soon might take on Apple itself.

Rumors are swirling that Amazon is working with Samsung (005930.KS) to develop its own Android-based tablet. And looking at some numbers it’s not hard to see why: Apple sold more than 14 million iPads in 2010, and experts predict as many as 60 million iPad 2s will be sold in 2011.

In theory, an Amazon tablet would aim to be more affordable than the $500-iPad, potentially opening it up to even more sales. Just this month, Amazon announced it would sell an ad-based Kindle beginning May 3, knocking $25 off the $139 price tag.

Amazon could also offer the tablet at a lower upfront cost because it would rely on services already offered through the site. The tablet would, most likely, be exclusive for Kindle books, use Amazon Instant Video, apps from the newly launched Amazon Android Appstore and music from the even newer cloud-based music service.

Amazon may have taken its first steps toward the tablet last Thursday, when they released an updated version of their Kindle app which is compatible with the Android 3.0 Honeycomb operating system.

The update also includes a tablet-specific layout for magazines and newspapers, an easier checkout process, pause and resume downloads and a built-in dictionary to look up words directly from whatever you’re reading. It also features Whispersync, which acts as a bookmark and lets readers switch from phone/tablet/computer/Kindle without losing their place. It will also work later this year, when Kindle readers will be able to borrow e-books from 11,000 libraries.

“We’ve taken all the features customers love about Kindle for Android, and created a beautiful new user interface,” said director of the Kindle, Dorothy Nicholls. “Kindle for Android is the perfect companion for the millions of customers who own a Kindle and a way for customers around the world to download and enjoy books on their Android phone or tablet even is they don’t yet own a Kindle.”

The free app is already available for download. The tablet? Well, its release is anybody's guess. The Kindle 3 was unveiled last August, so perhaps the countdown is already on.