No, not the hardware, but the whole offerings around it.
They will offer a seamless set of TV/movie downloading/streaming, music downloading/streaming, e-book downloading/streaming, shopping, GPS navigation, phone calls, etc., etc., . . . . for joining Prime or for low subscription fees.
Geez, I usually don't care about fundamentals, but this will be so big I have to pay attention to.
The amzn tablet will be an hideous failure.(let me define failure for you: inferior device that gains less than 5% market share and they loose money producing)
You can seamlessly consume media on any current device and their device will have absolutely no important differentiators other than it will be extremely annoying to use if you want to buy something from some site other than amazon.com.
They will sell it at a loss - you can bank on that - they have a core competency in that category.
However - in their 4Q11 report they will tell wall street that the success of the tablet beat their wildest expectations (of course we be left to analysis to tell us how many they sold and we know how accurate they are).
You forgot one other thing... distribution will S-U-C-K. Noone will go to any effort to sell it other than Amazon themselves. Look at Kindle's distribution "partners":
Target: I went into Target yesterday and their Kindle display now has an iriver story inside of it. If you want the Kindle, you have to ask someone to get it from behind a counter where it is hidden. Now, try to find Kindle on Target.com without searching for it by name. Give up- it's in electronics, under "books", see the link for Google reader- click the "other ereaders" button under it. Now scroll down past the Aluratek, the iriver, the Sony, and multiple Pandigital models. There it is! But unlike every other ereader, you can't order it online- it is "stores only".
Best Buy: Go to the Best Buy website ereader section. They list 10 bestsellers- Number 1 is the nook, followed by kobos, Pandigitals, and even a crappy velocity tablet. Kindles aren't on the list.
Staples and Toys R' Us: Who cares?
Walmart? Newegg? Overstock? No Kindle, no Kindle, no Kindle. Search for "Kindle" and they show you a nook.
Maybe Amazon's front page is enough to dominate the ereader market- but tablets? Come on- you need distribution.