Amazon to lose $50 on each Kindle Fire, says analyst

Amazon to lose $50 on each Kindle Fire, says analyst:

Amazon's Kindle Fire

(Credit:
Amazon via Bloomberg)

Amazon may lose as much as $50 on each Kindle Fire tablet it sells, according to Piper Jaffray analyst Gene Munster.

In an investor note released yesterday, Munster calculated the manufacturing cost of each Kindle Fire at $250. But Amazon is selling its new tablet for $199. In comparison, Apple spends about $350 to produce a $499 iPad 2.

Assuming Amazon is able to sell 2.5 million tablets in the fourth quarter, Munster says the loss on each Kindle Fire could affect earnings by 10 percent to 20 percent. However, as other analysts have noted, Amazon isn't counting on sales from the hardware.

Instead, the company is hoping to draw in more consumers to spend money on its entire digital shopping center of music, books, videos, apps, and other products. If successful, that strategy should more than compensate for the loss the company takes on each tablet and the impact on earnings.

"We point out that the outlined potential downside does not cont... [Read more]

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