Quote:
Originally Posted by carld
I'd say the same. I see lots of claims that Amazon is losing money on the new $139 Kindle, but it's all just supposition and maybe a bit of sour grapes.
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lol, no sour grapes here-but yes, supposition, plus some experience in consumer electronics manufacturing costs. Amazon was selling a hardware device at $260 (at a profit, as Jeff Bezos
made clear until last month.
Then, probably in response to Kobo/B&N getting aggressive, they dropped the price to $190 (27% drop). What do you think their margins were before the drop? According to
one analyst:
Quote:
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Wolk cited concerns about profit margins. She estimated that at its previous price of $259, the Kindle's margins were about 15% to 20%. At its new price of $189, she thinks Amazon.com may wind up only breaking even on each sale.
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That was on the
existing Kindle 2, which at least was amortizing the tooling/manufacturing costs over a year and a half. The Kindle 3 has new plastics, new components, a better screen, and more memory. I just don't see how they are making a hardware profit on them right now-unless the K2 had incredibly high profit margins to begin with.
My .02 cents of supposition anyways
I personally think its an incredibly aggressive move on Amazon's part, that the rest of the ebook market is going to have a tough time responding to.