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I think it was just poorly thought through cost cutting. The Kindle 2 design didn't appear to change so much that there was no longer room in the case for an SD slot. So they figured they could save $15 on the cost of making a Kindle by taking it out and sell the Kindle for $15 cheaper and did it. They failed to realise how much customers like the SD slot.
They probably lost more buyers due to Kindle 1 users not upgrading.
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