Amazon ‘Fire’ A Threat To Netflix; Would They Buy Streaming Opps?

Regarding Amazon.com’s (AMZN) unveiling of its “Fire” tablet computer today, the competitive force of the device is certainly being taken seriously on the Street. I noted some initial positive reactions earlier from Citigroup and from Piper Jaffray.

Fred Moran of The Benchmark Company, who rates Amazon shares Buy, with a $256 price target, this afternoon writes that the various Kindles “represent new low-cost entry points and pose potential competitive challenges to Apple” but also to Google (GOOG) and to Netflix (NFLX).

Reviewing Bezos’s letter to customers about the devices, Moran remarks that Amazon is “subsidizing the cost” of the Fire to lure customers to Amazon’s “Prime” subscription service, which generates $79 per person per year for free shipping, movie streaming and other features.

“One of the most interesting and potentially impactful announcements was Kindle Fire customers receive a 30-day free trial of Amazon Prime,” he writes.

“This is a direct threat to Netflix. Anyone with a Kindle Fire and Amazon Prime may have little use for Netflix streaming. In addition, Amazon Prime members are more likely to shop first at Amazon, driving loyalty at the traditional eCommerce business.”

Moran also thinks the tablet shows why Google, whose stock he also rates a Buy, was smart to buy Motorola Mobility (MMI): “Google must protect Android, while also controlling the user experience from end-to-end, which includes hardware design. Google must defend against being disintermediated by Amazon and Apple.”

Amazon shares are up $6.92, or 3%, at $231.13, while Netflix shares are down 51 cents, or 0.4%, at $126.98.

Update: Somewhat more! dramati cally, Collins Stewart’s?Mayuresh Masurekar, who rates Amazon shares Neutral, this afternoon writes that the Fire could be a prelude to Amazon buying Netflix’s streaming operations:

We believe?the tablet launch and the integration of Amazon’s ebooks, digital music?and digital movie offerings with the tablet indicate accelerating pace of?innovation at Amazon to stay ahead of the secular shift to digital format.?We believe there is a high likelihood that Amazon will: 1) launch a 10″?tablet priced below $300 in early 2012, and 2) purchase the streaming business of Netflix.

In the meantime,?Masurekar thinks the cheaper Kindle readers could help push adoption of electronic books to 35% of all published titles in 2012, up from 17% currently. He also thinks the new products have “strengthened Amazon’s competitive position in ebooks compared to?Barnes & Noble (BKS) and Apple (AAPL).

Masurekar’s enthusiasm is tempered by concern for what these new products will do to Amazon’s profit margin.