Amazon likely to lose $50 for every Kindle Fire sold

By on September 28, 2011, 5:30 PM

Amazon is likely to lose around $50 for every Kindle Fire tablet that the company sells. Piper Jaffray’s Gene Muster further believes that the Fire isn’t a true competitor to Apple’s iPad, but it is more competitive than the financial services researcher initially thought.

Muster said as much in a note to investors just after Amazon’s announcement earlier today, according to CNN Money.

The analyst believes the 7-inch screen is one of the tablet’s cons. Additionally he lists the 8GB of local storage and lack of cameras and a 3G option on the minus side. In comparison, the iPad is available with 16GB, 32GB or 64GB of built-in storage.

Where the Kindle Fire will shine, however, is with its superior content delivery. Amazon will leverage their assets to provide movies, music, books and storage on the Cloud in addition to traditional web browsing and gaming. This is where the company is expected to make money on the tablet. In contrast, Apple makes about a 30 percent gross margin on iPad hardware upfront.

Muster thinks Apple’s tablet market share could fall to as low as 60% next year with Android’s share climbing to around 30 percent, riding the coattails of the Kindle Fire and other yet-to-be-released tablets.

Amazon introduced the Kindle Fire tablet earlier today at $199, significantly undercutting Apple’s iPad 2 which has a starting price of $499. Fire pre-orders are being taken now with units shipping on November 15.




User Comments: 11

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Vrmithrax Vrmithrax, TechSpot Paladin, said:

Ah, so they have taken the console gaming approach... Well, if they have their own app store for revenue (on top of e-book sales), Amazon should be able to quickly recover more than that deficit from a good number of their customers. Over the long haul, it'll be a quantity numbers game, and Amazon has repeatedly proven it can win when it plays that way.

Tanstar said:

And the consumers win when Amazon wins, so I'm for that!

1977TA said:

Sell it for a loss to gain a customer base, then charge for apps/subscriptions. Works for me!

Guest said:

thats not what it said. They were talking about iPad when they talked about gaming.

Guest said:

"Amazon will leverage their assets to provide movies, music, books and storage on the Cloud in addition to traditional web browsing and gaming."

Nope right there they are talking about Amazon.

aj_the_kidd said:

If the screen is good and the unit is light, i think the 7" screen is a good choice. What OS is it running?

Tekkaraiden Tekkaraiden said:

It hints it has android on it but it doesn't outright say it.

Guest said:

Android is a fork of Linux, Amazon Fire is a fork of Android.

Wagan8r Wagan8r said:

Guest said:

Android is a fork of Linux, Amazon Fire is a fork of Android.

They're child processes?

Kibaruk Kibaruk, TechSpot Paladin, said:

Ok... so amazon looses out of selling their tablets, it has nothing to do with the content and things they sell for you to use on your tablet...

Ultraman1966 said:

I think this tablet may have a little trouble; with only 8GB of non expandable memory, it needs a good and frequent connection to the internet and wi fi is hardly universal everywhere...

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