Amazon ramps up Kindle Fire production, worries investorsBy Jose Vilches
Amazon is boosting production of the Kindle Fire tablet ahead of its November 15 release. During the company's latest financial results announcement, founder and CEO Jeff Bezos said pre-orders have exceeded expectations and thus they are increasing capacity and building "millions more" than initially planned. Though he didn't reveal an actual number Bezos' statement suggests the Kindle Fire is already a sizeable contender even before reaching customers' hands.
Tablets are expected to be a hot item this holiday season and Amazon has high hopes for its first tablet. The Kindle Fire forgoes standard features like 3G access, a microphone and front/back cameras to achieve a low $200 price point. But even though it won't break any records in terms of hardware it will definitely compete as a consumption device as it is tightly integrated with Amazon's services. Users will get a 30-day trial of Amazon Prime, plus access to its Android, Kindle and retail stores, free cloud storage, and a fast web browser that takes advantage of Amazon's EC2 servers.
Despite the excitement for the new Kindle lineup, Amazon's earnings for the quarter came in below expectations and shares dropped 19% in late trading. This suggests – as many had presumed – that Amazon is selling the tablet at a loss because it can sell more stuff to Fire owners in the long run.
Amazon CFO Tom Szkutak said the company thinks about the Kindle in terms of its lifetime value: "we look at the total economics, which include the device, the accessories, the content, as well as the ad-based revenue and special offers." The company is building its business for the long-term, without worrying about the short-term expectations of Wall Street traders, confident that the model behind a $199 tablet will pay off over time.