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Is Amazon Losing Money On Every Kindle Fire?

Submitted by on October 8, 2011 – 9:37 pm4 Comments

The Kindle Fire was immediately praised as the great “iPod Slayer” upon its release recently, largely because of its price: $199. But what kind of victory will Amazon win if it loses four bucks on every one of the millions of tablets bound to be sold?

A market research company released a report calculating the cost of every Fire, including all materials and manufacturing, to be $209.63. Even without manufacturing costs, IHS Market Research showed the unit costing about $191, giving Amazon a tiny profit margin.

Other estimates were worse. One analyst thinks that Amazon could lose $50 bucks one every tablet.

(By comparison, Apple spends about $350 on an iPad 2 that sells for $499.)

But would Amazon lose money on a product, or even cut its profits so close? They might, if their plan isn’t about selling hardware.

Analysts believe that Amazon is willing to take a loss on the tablet if huge sales will drive massive purchases of other Amazon products and service. The company can “more than make up the gap by selling a certain number of videos, songs, books, cloud storage, and other type of content to a typical buyer,” according to CNET.

What do you think? Will Amazon’s gamble pay off?

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