Amazon losing $2.70 on every Kindle Fire

[banjobama]

Not surprising, but an interesting breakdown.

[ucfgrad93]

Just to state the obvious, but this is not a proven fact. These figures were provided by someone other than Amazon. For all we know, they could be making $2.70 on each Kindle Fire.

[cfrizz]

Unless it comes from Amazon, the above is meaningless speculation. A company the size of Amazon no doubt has special pricing from manufacturers that is more than likely lower than what is stated above. This is a common practice in business. I seriously doubt that they are paying anywhere near that amount.

[RainingLemur]

Assuming that those figures are true (or even close to it), I would be thrilled if I could produce and sell something like that at that small of a loss, and probably make up for that loss in a few app/book purchases.

[tubemonkey]

Well, Amazon is large enough and can afford to take this hit on hardware. They'll more than make up for it in content sales.

These numbers also explain why Amazon doesn't include a USB cable with the Fire and why it no longer includes wall chargers for the Kindles.

[abookreader]

Yeah, don't feel too bad for Amazon. I'm pretty confident they've made much more than $2.70 back from me in other buys.

[monkeyluis]

Originally Posted by abookreader

Yeah, don't feel too bad for Amazon. I'm pretty confident they've made much more than $2.70 back from me in other buys.

That's what I was thinking. Technically they're making a boatload of cash. I always think of Bezos jumping into a cash pool & swimming through it.

[murraypaul]

Originally Posted by monkeyluis

That's what I was thinking. Technically they're making a boatload of cash. I always think of Bezos jumping into a cash pool & swimming through it.

They actually operate on extremely slim margins, so every penny pinched here and there helps a lot.

From their latest figures:

Net sales increased 44% to $10.88 billion in the third quarter, compared with $7.56 billion in third quarter 2010. Excluding the $371 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 39% compared with third quarter 2010.

Operating income was $79 million in the third quarter, compared with $268 million in third quarter 2010. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $14 million.

Net income decreased 73% to $63 million in the third quarter, or $0.14 per diluted share, compared with net income of $231 million, or $0.51 per diluted share, in third quarter 2010.

So $10.88 Bn in turnover, but only $63 Mn in income.

Oh, and the figures in the original post are pretty meaningless not only because they are just guesses at the manufacturing cost, but because manufacturing cost isn't the only cost! It ignores all transportation, wharehousing and retail costs.

[tubemonkey]

Originally Posted by murraypaul

Oh, and the figures in the original post are pretty meaningless not only because they are just guesses at the manufacturing cost, but because manufacturing cost isn't the only cost! It ignores all transportation, wharehousing and retail costs.

Guesses ...hmmm

Well, I'm a Kindle owner and I agree that iSuppli doesn't know what the heck they're talking about. My Kindle based guess says that manufacturing costs for the Fire are only $149, because of the fantastic volume deals Amazon struck with contractors. R&D and post-manufacturing costs are $25, so that means Amazon is clearing $25 pure profit per unit on the Fire.

[cHex]

I wonder how much injet printer manufacturers lose on each printer? And surely my HTC Hero smartphone cost a lot more to manufacture than the $0.01 I paid for it....

[ilovejedd]

With phones, the carriers are guaranteed to recoup their cost. You're tied to a contract with hefty early termination fees so regardless of what you do, you still end up paying for the phone (unless you die). With the Kindle, if they do subsidize part of the device cost, Amazon is banking on the possibility that they can get you to buy more content from them.

[wodin]

That's in the US, other places don't have locked in contracts or ETFs. That why a phone that costs five or six hundred euros can be had for one or two hundred dollars in the US with a two year contract.

[ilovejedd]

Originally Posted by wodin

That's in the US, other places don't have locked in contracts or ETFs. That why a phone that costs five or six hundred euros can be had for one or two hundred dollars in the US with a two year contract.

Frankly, I'd much prefer buying the phone outright than having the cost of the phone (and then some) added to my monthly service fee. Once you've paid for your phone, that's it. In the US, even if you keep using the same phone for 10 years, your monthly rates never go down. Also, while there are theoretically 4 big national carriers (Verizon CDMA, AT&T GSM, Sprint CDMA, T-Mobile GSM) and plenty of regional ones, due to coverage, you're usually limited to either AT&T or Verizon. I'd really love to go with T-Mobile's Value Plan but they don't have signal where I work.