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Did Amazon Nuke eReader Market with Kindle Fire?

If you listen to Amazon's numbers, the company came out of the 2011 holiday season with a huge wad of cash in its pocket thanks to the Kindle Fire, Kindle Touch and the original Kindle e-book reader. Between the three, there's a flavor for every consumer ranging from the basic colorless electronic reader to the full-blown tablet experience (if you nuke the bookshelf loader, that is). But there may be more than what Amazon is letting on.

Digitimes Research claims that global shipments of e-book readers including the Kindle and Kindle Touch are only expected to reach 2 million units by the end of March. To be honest, this shouldn't be surprising given that consumers did most of their shopping in 4Q11 -- a lack in sales in 1Q12 shouldn't be any big surprise. Thing is, the number of units sold in 4Q11 was 9 million, meaning the number of units shipped will have dropped a fat 7 million by the end of March.

What's to blame for the drop? Amazon's Kindle Fire. For $199, it's a great deal, and that's no sales pitch. Consumers get a tablet that plays HD games from Gameloft, streams movies and TV shows from Amazon Instant Video, surfs the Flash-laden internet, plays music, becomes a portable office, and even allows owners to read books. The OS just keeps getting better with every update, putting previous complaints about sluggish touch screen controls and other launch problems in the past.

That said, consumers may simply see the $100 "upgrade" from Kindle Touch ($99) to Kindle Fire ($199) a great value, taking the plunge. Why not get a gadget that's not only backlit, but plays movies and Words With Friends too? Still, has Amazon shot itself in the foot in the process? Unnamed sources claim the launch of its Kindle Fire has resulted in a "substitution effect" for the other Kindle e-book readers since the beginning of 2012, thus forcing Amazon to reduce its orders from upstream suppliers for those two non-tablet models.

But there doesn't seem to be an end in sight for the e-book reader form factor despite the 1Q12 drop. Global shipments have amounted to 22.82 million units in 2011, a 107-percent increase from 2010, and annual shipments are expected to reach an impressive 60 million units by 2015. But there's also a good chance the e-book reader will be no more by then, giving way to a new form factor that provides similar Kindle Fire services but at the sub-$80 Kindle price.