The Razor vs. the Blade
I hope you'll find these comments insightful; forgive the haphazard presentation.
I think Amazon has a great shot at success, if for no other reason than price. They'll sell a ton of Fire tablets, and then (they hope) sell lots of content locked to their platform.
Note that lots of reporters have written that the Fire is an Android tablet, but Amazon never describes it that way. Yes, their OS started with the Android source code, but Amazon hasn't licensed the Android name, meaning they aren't beholden to Google in any way. (Official Android licensees are required to install certain Google apps and services if they want to use the Android name.)
We all know the razors and blades analogy. Consider:
Razors = Tablets
Blades = Content (books, music, video, and apps)
Amazon is selling razors near (or below?) cost, in hopes of eventually making up the difference by selling lots of blades.
Apple sells blades near cost to make their highly profitable razors all the more attractive.
The big difference is that Apple gets profits now, and more profits later. Meanwhile, Amazon is taking a huge hit right now, in the hope of more profits later.
I don't think Amazon is wrong; I think they have no choice. If your business is selling blades, you'd better also be making razors! In a marketplace where products are delivered electronically, Amazon must provide consumers a reason to buy from Amazon, and Kindle Fire provides that reason. (What else could they do? Hope to compete against Apple on Apple's own platform?)
I will be very surprised if, two years from now, anybody besides Apple or Amazon has 20% of the tablet market.
Also, don't expect Amazon to win any corporate converts. Sure, corporations might love to get their hands on a $200 tablet, but since businesses are unlikely to buy lots of music, movies, and books, Amazon wouldn't likely benefit from such sales. I expect they'll do whatever they can to actually thwart corporate sales. They could simply limit sales to 1 or 2 per customer. (Though they aren't doing that right now; I just added 999 Kindle Fires to my cart, and I didn't get an error message. Since I don't have $198,801.00, and don't actually want even 1 Kindle, I removed them from my cart!)