I see the Kindle as its own product and eco-system. Sure it runs Android, but I don't think of Android nor will most consumers - they'll just see Amazon (which is a winner for them).
Which I think is the plan. None of their marketing is focused on Android at all, and they are promoting the Amazon App store (since it doesn't use the Android Market).
Kindle Fire fragments Android like Nook color does
I think we need to be careful with how we define fragmentation. The Nook Color doesn't fragment the user in any way, shape, or form.
B&N cherry picks which apps are available to the user, and have used Android to create a "closed" platform. This is different than saying it's a fragmented device because it can't run a lot of things. What it can or can't run becomes irrelevant because of the nature of the device.
Fragmented is when a device can't be upgraded and can't take advantage of current apps or technologies leaving holes. When you buy a Nook Color, you arent being told you're buying an Android tablet that's open. It's not even branded as Android (we just know inside it is). When you buy a Droid phone or anything branded Android, that promises to be open and upgradeable and compatible, this is when fragmentation is relevant.
Kindle Fire can be successful because it's not an "Android Tablet", it's a Kindle Fire. It's unique to Amazon and it is part of the successful and well-known Kindle product line. It just happens to run Android.
And a very customized and tweaked version of Android. Amazon went further than just skinning it like most device makers do.
I think Amazon and dare I say, RIM (if they ever release the Playbook 2.0 software) have started to pave the way for a new trend. The Playbook 2.0 software is Black Berry's OS... but it has a layer added to allow it to run Android apps. While I don't think RIM is going to be the company to pull the rug out from under Google, it should inspire other companies.
Amazon can afford fragmentation, because it's a media-centric device. They don't want competing elements on their hardware (Netflix for example). Where Android sucks in the tablet space is it's hodge podge and hodge podge way of bringing content. Amazon doesn't have Google's problems, and they don't have Apple's either. Amazon is such a juggernaut in the retail space, they have a lot more pull in pricing. Apple can't compete with Amazon's music prices (or movies for that matter), and Amazon gets bigger cuts of the profits than Apple in most cases. For Amazon, this is genius. Apple can laugh at fragmentation.... they won't be laughing when Fire users are rubbing in their iPad using friends faces how they paid so much less for their content.
I looked at everything I bought in iTunes in the past three weeks, compared it to Amazon, and I would have been $30 better. Why don't I buy from Amazon? It's a pain in the butt. I have to go to their site, use their third party downloader, and then import all the stuff. iTunes is 1 click and enjoy the content. The Fire solves that issue. If they came out with a 10" tablet, and it can stand on it's legs well, I'd highly consider one over an iPad. In a year of purchases, it could almost pay for itself in content savings vs. the iPad. You don't really notice the hurt when it's $2 here, $1, there, 20 cents there... but when you add it all together, it stings. Add in all the special sales and offers Amazon often does (Like selling Lady GaGa's new album for $1, or randomly offering any Ebook for $1 for 24 hours), I don't think people are going to feel cheated in any way.