If the Kindle is such a big hit, why would Amazon.com ( AMZN) make online reader software for Apple's ( AAPL) iPod touch and iPhone?

Early this morning, Amazon announced "Kindle for iPhone and iPod touch," a new, free application available from Apple's App Store. It's designed to let customers enjoy more than 240,000 books, including 104 out of 112 New York Times bestsellers, on your iPhone and iPod touch using Apple's Multi-Touch user interface. Most new releases sell for $9.99.

Amazon Kindle2 Introduction

According to Amazon's press release, with the new Kindle for Apple software you will be able to:

  • Shop for hundreds of thousands of books on their Kindle or online (http://cts.vresp.com/c/?OutCastCommunication/eee67f5f04/3df9ea6f94/28ad02dd75
  • and wirelessly transfer the books to your iPhone or iPod touch
  • Access the entire library of previously purchased Kindle books stored on Amazon's servers
  • Adjust the text size of books
  • Add bookmarks and view notes and highlights

"We are excited to bring the new Kindle application to Apple's App Store and think customers are going to love how easy and fun it is to read their Kindle books on the iPhone and iPod touch," said Ian Freed, vice president, Amazon Kindle. "Kindle for iPhone and iPod touch is a great way for customers to catch up on their current book wherever they are, like in line at the grocery store or between meetings."

Amazon, whose stock has been a highflier in a miserable market, stresses that there is a synergy going on here between Apple and Amazon products.

Amazon's Whispersync technology allows users to save and synchronize a bookmark across your original Kindle, Kindle 2, iPhone and iPod touch (assuming you have one or more of the devices). By doing that you will always have your reading with you and never lose your place. Kindle customers can read a few pages on their iPhone or iPod touch and pick up right where they left off on their Kindle.

With this new system you pay only once for the book and can read it on both your Apple and Amazon devices. When you buy the books, they are automatically backed up on Amazon.com and can be redownloaded for free.

I believe Amazon is taking a big gamble with this new software. It's sacrificing potential Kindle hardware sales for the possibility of making a fortune selling books to iPhone/iPod touch users. If that's the case, why bother with the Kindle to begin with?
Gary Krakow is TheStreet.com's senior technology correspondent.