Amazon.com (NASDAQ: AMZN) makes no money on its new Kindle Fire tablet PC. That may be a sign that it will seek to take market share from Apple (NASDAQ: AAPL) and hope that content sales or a drop in the costs to make the Fire will improve margins.
According to iSuppli, “A preliminary virtual estimate conducted by the IHS iSuppli Teardown Analysis Service places Kindle Fire’s bill of materials (BOM) cost at $191.65. With the addition of manufacturing expenses, the total cost to produce the Kindle Fire rises to $209.63.”
The firm added, “When further costs outside of materials and manufacturing are added in—and the $199 price of the tablet is factored along with the expected sales of digital content per device—Amazon is likely to generate a marginal profit of $10 on each Kindle Fire sold.”
Amazon.com has made a price mistake. It will not be able to turn a profit just because it takes market share away from Apple–not on a product that costs more to make than it gets from consumers.
Douglas A. McIntyre
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