This is just the latest in a string of rumors that's been painting a pretty clear image. And, regardless of the rumors, if Amazon isn't working on an Android device, it better start soon.
Ever since the iPad came around, there have been rumors about an Amazon tablet, with a full color LCD display to counter to complement or even replace its Kindle device.
Of course, that was mostly speculation at first, but it started to get some weight after the first rumors of an Amazon app store surfaced.
It seemed like a farfetched idea at the time, users would have to install the app store manually and Amazon would have to entice Android developers who haven't even warmed up too much to Google's own Android Market.
But the App Store became reality and is now live for everyone to use. It's unclear how many people have installed and are using it, but since it takes several more steps than just installing an app from the Market, it's probably not that many.
Amazon could be partnering with carriers and manufacturers, to bundle the Amazon App Store alongside or replacing the Android Market, but that's not the best solution, in terms of integration, and Google probably won't like that.
So Amazon has to build its own devices. Considering the success of the Kindle, it's the biggest selling item on Amazon, the company may very well deliver a solid series of devices.
The latest rumors indicate that two tablets are in the works, an entry level one dubbed "Coyote" based on the Nvidia Tegra 2 platform and a more expensive model dubbed "Hollywood" built on top of Nvidia's next gen T30 "Kal-El."
Add to this Amazon CEO Jeff Bezos' comments last week when asked about a tablet, "stay tuned," and there should be little doubt that something is coming.
There's hardly a lack of Android tablets so a couple of new devices aren't much to get excited about, even if they're from a new player. Much more interesting will be the customizations to the Android platform that Amazon adds.
The App Store is most likely going to replace the Android Market altogether, but there are plenty of other Google apps and services that may get the boot, including search, Gmail and so on.
Google can afford to develop and give away Android because it makes it all up from the ads it serves on all the new devices. But if these devices start using something else, Bing for example, Google is not going to sit still and let that happen.