Amazon's Kindle e-reader may be one of the most popular e-readers, but the company's long-term position in the market is far from certain.
On one flank, the Kindle competes with the most popular tablet device, the iPad, and on the other, competitors like Barnes & Noble have built more sophisticated devices like the NOOK Color.
So Amazon is rumored to be responding later this week with a new version of the Kindle that's more like the iPad and NOOK Color.
Dubbed the Kindle Fire, it will reportedly feature a 7" backlit display, books (of course), plenty of magazine subscriptions, and apps to boot.
Needless to say, much of the speculation about the Amazon Fire includes a discussion of its potential impact on Apple and the iPad, particularly given the controversial report issued by J.P. Morgan stating that Apple cut iPad orders by 25%.
But the Fire, as described, will represent much bigger competition for Barnes & Noble's $250 NOOK Color, which also features books, magazines and apps. The latter, of course, are not available on the current versions of the Kindle, putting Amazon at a potential disadvantage in the e-reader wars.
Barnes & Noble has been courting Android developers to develop apps for the Color, and its efforts have brought games like Angry Birds to its platform.
Amazon already has an Android app store of its own, but it isn't exactly winning over developers and consumers. That could change overnight, however, as the Kindle Fire exposes Amazon's Android app store to potentially millions of consumers.
On the surface, the Kindle Fire looks like good news for Amazon, and worrisome news for Barnes & Noble. But that may not be the case.
According to gdgt's Ryan Block, the Kindle Fire that's being released in November is really just a "stopgap" so that Amazon has a color e-reader to sell this holiday season. It's based on RIM's PlayBook, which hasn't done too well, and expectations for the Fire seem to be pretty low inside Amazon if Block's sources are to be believed.
If the Fire disappoints and isn't competitive, its release could prove very harmful to Amazon. Barnes & Noble is rumored to be prepping the launch of a higher-end, 10" NOOK Color 2 next month, and the iPad isn't going anywhere any time soon.
The Fire has to deliver more than smoke if it's going to be a hot seller, and given how competitive the tablet/e-reader market is, Amazon would be well-advised to consider that the long-term implications of a short-term strategy may not be positive.