If Hewlett-Packard had started selling its entry-level TouchPad tablet at $199, it might not have had to let go of the tablet business, along with its hard-luck CEO. Now Amazon is selling its Kindle Fire at $199, less than half the price of Apple's $499 entry-level iPad2.

But Amazon misses the point: One basic tenet of marketing is that you can't release an inferior product in a saturated market.

HP got it right with the features -- the TouchPad was run by a platform that cost the world's largest PC seller $1.2 billion, it has its own unique features like Adobe Flash support, built-in Skype support, wireless printing, syncing with cloud services, etc.

But, HP missed the point too. It launched the device at the same pricing as the iPad and at a time when it still needed to penetrate the market and woo developers to build apps for it.

Observers have speculated that Amazon is the most serious threat to the Apple's iPad, as the the online retailer is willing to sell products at low profit margins. Apple, on the other hand, is selling the iPad at a margin of 40 percent. Meaning, for the 30 million iPads that it has sold since April 2010, it has profited as much as a staggering $6 billion.

It's true that Apple is good at borrowing existing technologies, focusing on the aesthetics and having a brilliant marketing team to sell its pricey devices. But Amazon is not Apple. While Amazon will likely be more popular in Brazil, because its rainforests have the same name, Apple's still the leader in innovation in mobile devices, regardless of whether critics just call it putting lipstick on.

And the Kindle Fire? It has a 7-inch touch screen, runs on Google's Android 2.3 Gingerbread platform, and has 8 GB of storage. It has no camera or microphone, has no native e-mail client. There is no 3G connectivity, or even a SIM card for wireless connection, but it has Wi-Fi. Even the smartphones (yes, smartphones!) have cameras, have more storage, are more powerful with dual-core processors, and have more features than this tablet. The Kindle Fire is just an eBook reader that allows you to do some browsing and movie watching.

But what about the price? Yes, it's cheap at $199. But note that the iPad is just a third computing device. People who own iPads first bought desktops or laptops and then smartphones. Yes, there is demand for low-end phones (those for texting and calling only) notwithstanding the variety of high-end phones in the market. But selling an inferior good doesn't work when an iPad is more of a functional fashion statement.

Also note that there isn't a very high demand for tablets that don't have an apple logo at the back. Sales of the iPad have been skyrocketing, but rivals like the Motorola Xoom, Research in Motion's BlackBerry PlayBook and others have been cluttering retailers' shelves.

Backed by Amazon Prime, the $79-a-year Amazon service for downloading e-books, music and videos, the Kindle Fire makes present e-readers a thing of yesterday. Amazon's e-reader on steroids will try to beat black and blue Barnes and Noble's Nook Color, which also runs on the Android platform and has the same features.

But marketing the Kindle Fire as a $199 tablet? While the Kindle Fire stand tallest among e-readers, it will be a lost puppy in the tablet space. And erasing the line distinguishing a tablet from an e-reader will only kill Amazon's and Barnes and Noble's e-reader businesses.

People looking for the functionality, the ecosystem, the user interface and features provided by most tablets will certainly be disappointed with Kindle Fire's limited functionality. And so, by placing these glorified iPad wannabe e-readers beside the iPad in shelves, people will realize that buying these e-readers no longer makes sense.

Of course, the 14.6-oz Kindle Fire allows you to download and store 100,000 movies, 17 million songs, and as many magazines as one could read. But Amazon still misses the point.

When you're offline, getting a 1-terabyte external storage device for my laptop would make more sense.