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Businesses Handhelds The Almighty Buck

Amazon To Lose $10 Per Kindle Fire 181

An anonymous reader writes "According to a manufacturing cost breakdown, it turns out Amazon is willing to sell its new Kindle Fire at a $10 loss. An analyst estimates that the Kindle Fire, priced at $199, actually costs $209.63 to produce. That said, the device is likely to be much more valuable to Amazon through content sales and the ability to drive more purchases through its website."
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Amazon To Lose $10 Per Kindle Fire

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  • Re:Only $10? (Score:5, Interesting)

    by melted ( 227442 ) on Saturday October 01, 2011 @01:17PM (#37577980) Homepage

    ISuppli routinely lowballs estimates. Sure, the components cost this much. But how much does it cost to deliver them to the factory, put the devices together, test them, package them, write software for them, run the cloud services, etc, etc. It all costs money, and the fewer devices you sell, the greater fraction some of these costs are. So in a way, costs can't even be estimated until you know the overhead, and until you sell N units. And then Apple will sue their ass, further adding to the cost.

  • by fuzzyfuzzyfungus ( 1223518 ) on Saturday October 01, 2011 @01:49PM (#37578200) Journal
    It will be interesting, once these units get into hacker hands, to see whether that strong incentive (which definitely exists, for the reasons you state), is pursued by technological means, or whether they'll skip the cat-and-mouse with the hypothetical 'fire dev team' and work on the assumption that the pool of users who want intuitive point-and-poke access to Amazon sold stuff is much larger than the pool of tablet hackers and ignore the problem...

    Given that a fair number of nook colors have already been sold to the tablet tinkering crowd, and the HP touches during the blowout, and some of the Viewsonic and other cheap-but-not-bottom-of-barrel stuff, have all been out for a while, it won't necessarily be the case that the techie crowd will be all that dangerous in terms of numbers(especially if they do want to sideload some stuff; but also end up buying Amazon MP3s, kindle books, etc.)

    It would certainly be no surprise to see some sort of lockdown; but it also might prove to not be worth the effort.
  • by downhole ( 831621 ) on Saturday October 01, 2011 @02:07PM (#37578326) Homepage Journal

    I'd bet that even Amazon themselves couldn't produce a meaningful figure for what any particular one costs to make. They're probably buying enough parts from enough suppliers that all of their deals are changing all the time for each particular part. Not to mention the cost of the design process and creating and maintaining the custom software, production line shakeouts, estimated value of future purchases, estimated value of having control over some percent of the market, etc etc. Some department somewhere probably uses lots of Excel formulas and a little black magic to figure out that they'll do all right overall selling them for $199.

  • by cats-paw ( 34890 ) on Saturday October 01, 2011 @02:25PM (#37578452) Homepage

    These kind of stories always show up - but no matter how much they think they know about the production they are STILL
    underestimating the amount of buying power somebody like Amazon has.

    Amazon is probably quoting an _initial_ production run of 10 million units. They are getting excellent pricing.
    There is no way they are losing a penny on these things.

  • by Alex Belits ( 437 ) * on Saturday October 01, 2011 @04:09PM (#37579072) Homepage

    Amazon is in a slightly better position than other companies that produce devices at loss.

    A company that sells game console, cable box or phone to the consumer at loss intends to make profit on LICENSING access to things over it -- someone has to pay them to sell content to consumers (games) or consumers have to pay for access to something (TV, movies, wireless phone network). Now, rooted device allows to bypass those things -- everyone can write games, or switch to providers that have no relationship with manufacturers. The device is no longer a gatekeeper, so revenue is down.

    But Amazon doesn't need gatekeepers -- they already sell everything over the Internet, with any computer and plenty of phones already perfectly capable of accessing most of their content. Even Kindle DRM for books can be stripped with a regular computer. Whatever losses Amazon can have due to "piracy", it already does have, so the only thing Amazon cares for is profit on sales. Rooted tablet does not compete with Amazon sales of anything -- it's still useful for buying things from Amazon and reading/watching them in a manner that is more convenient than other forms of purchase. It still makes downloads from Amazon more attractive than buying physical media, thus more purchases and less shipping costs.

Neutrinos have bad breadth.