Amazon.com Inc. (NASDAQ:AMZN) has been the target of Apple Inc. (NASDAQ:AAPL) in its attempt to get into the e-book market in conjunction with its highly popular iPad. While Amazon.com Inc. (NASDAQ:AMZN) was not mentioned in the recent U.S. Justice Department price-fixing lawsuit against Apple and five publishers, there is little question that the online retailer was in the background – at the very least as the undisputed e-book market leader thanks to its wildly successful Kindle e-readers and Kindle Fire tablets.
While Apple Inc. (NASDAQ:AAPL) usually likes to be at the head of the competitive pack and be in full control of its own destiny, is it actually being pulled into the marketplace on the wholesale terms of Amazon.com Inc. (NASDAQ:AMZN)? Is Jeff Bezos outsmarting Tim Cook with its business model?
Amazon.com Inc. (NASDAQ:AMZN) has been making a killing on its wholesale model with some of its services and/or mechandise, linking losses on some items to other items that make a profit. For example, Amazon.com Inc. (NASDAQ:AMZN) is selling its high-end Kindle Fire HD for $500 to make some profit in exchange connecting that with a $50 per year data plan that would undermine most wireless carriers’ plans for a similar amount of monthly data. Meanwhile, Apple Inc. (NASDAQ:AAPL) looks to balance its profit margin across virtually all devices and services.
In the wake of the e-book price-fixing deal, it seems that Apple Inc. (NASDAQ:AAPL) has been pulling its prices down in its iBookstore and is apparently now forcing Amazon.com Inc. (NASDAQ:AMZN) to pull down its own prices in its marketplace to be competitive. A couple of examples were described here. While Apple was initially charged with fixing e-book prices higher to pull Amazon up, now it seems that the tables have been turned, and Apple just might be playing Amazon’s game.
Can it succeed long-term with this strategy, going against Amazon.com Inc. (NASDAQ:AMZN) in its own territory? One would have to think that this might be temporary to try to ge business for Apple, because to play a wholesale game seems to be against the Apple Inc. (NASDAQ:AAPL) model and seems to play right in the hands of Amazon.com – which already has developed a very loyal e-book following. That will likely play well for investors in Amazon.com Inc. (NASDAQ:AMZN) stock, like hedge-fund manager Jim Chanos of Kynikos, who had an $11.3 million play in Amazon at the end of June, raising his stock holding by 40 percent during the quarter.