Amazon squares up to Apple with its own Kindle

Amazon has quietly bought out a little start-up company making touchscreen technology, triggering speculation that it plans a touchscreen version of its Kindle e-reader.

The acquisition of New York-based Touchco marks Amazon's next strategic move in the escalating war between device manufacturers, each trying to carve out their niche serving the burgeoning market for electronic books.

Apple launched its iPad tablet computer – a bigger version of its touchscreen-operated iPod Touch – last week, alongside new software that would allow users to download books from a new online store. In a claim that sent shivers through Amazon investors, worried about a new competitive threat, Steve Jobs, Apple's chief executive, praised the Kindle but said the company was going to "stand on their shoulders and go a little further".

A Kindle using Touchco technology could be manipulated not just by touch, like the Apple devices, but with controls that are sensitive to the amount of pressure being applied. The New York company has developed a thin, inexpensive material loaded with touch sensors, using a technology called interpolating force-sensitive resistance.

The company was built by a team of scientists at New York University's Media Research Lab, and will be folded into Amazon's Kindle hardware division in California. A notice on the Touchco website says: "As of January 2010, the company is no longer doing business."

The acquisition was first reported by The New York Times, citing a source familiar with the deal, and Amazon declined to comment. It was not disclosed how much the online retailer was paying for Touchco.

It is estimated that Amazon has sold more than two million Kindles since the launch of the first version of the device in 2007, but it has never revealed exact numbers. Other booksellers have launched similar e-readers in an attempt to lock customers into using their online stores for e-book purchases.

Joseph Lampel, professor of strategy at Cass Business School, says Amazon must innovate to stay at the head of the pack. "Touchscreens are not unique to Apple," Mr Lampel said. "The Sony e-reader is touchscreen, for example. Amazon has faced some criticism from the outset for not using touchscreen technology. It has always wanted to keep the price low, and has argued the Kindle is perfectly functional without a touchscreen, and frankly it's interest is in selling books, not in selling devices. But others introduced the technology and now the iPad is touchscreen, so touchscreen is clearly the way things are going."

The existing Kindle is operated using buttons, limiting the size of the screen. The e-ink screen technology, while easier on the eye, limits the Kindle's ability to display graphics and colour content.

"From the consumer point of view, touchscreen is cool," Mr Lampel said. "Because these devices are bought by people of a certain age, who see them as much for display purposes as for their functionality, these things can be fad, trend or fashion driven. The cool factor should never be underestimated."